United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR TOM LINDEN (Of Counsel) Instructed by: Messrs McDermott, Wills & Emery Solicitors 7 Bishopsgate London EC2N 3AQ
For the Respondent	MR PAUL EPSTEIN (Of Counsel) Instructed by: Messrs Aldridge Parker Solicitors 27 Austin Friars London EC2N 2QP

SUMMARY

Challenge to ET's finding of direct race discrimination Raises S54A RRA 1976, the burden of proof and the effect of Barton. Challenge also to finding of unfair dismissal.

THE HONOURABLE MRS JUSTICE COX

1. This is an appeal by the Applicant's former employers, Dresdner Kleinwort Wasserstein Ltd (the Appellants), against the Decision of a London Central Employment Tribunal, promulgated on 19^th May 2004, upholding the Applicant's complaints of direct race discrimination, unfair dismissal and breach of contract/wrongful dismissal. The contested hearing below, held at the beginning of March 2004, lasted five days. Both parties were legally represented and the Tribunal received written closing submissions on the issues of fact and law arising at the end of the hearing, supplemented by oral argument. The grounds of appeal relate to the Tribunal's findings on race discrimination and unfair dismissal. No appeal is brought against the Tribunal's decision that this Applicant was not in fact guilty of gross misconduct, as the Appellants had found, and that in summarily dismissing him the Appellants were in breach of contract.
2. The appeal against the decision on race discrimination raises important issues relating to the burden of proof in such complaints before Employment Tribunals and to the effect of the amendments to the Race Relations Act 1976 (section 54A) as a result of Regulations in 2003 implementing Council Directive 2000/43/EC, which provides for equal treatment between persons irrespective of their racial or ethnic origin.
3. At the end of the day fixed for the hearing of this appeal (13^th October 2004) the parties had not concluded their submissions on all issues. Attempts to find another date convenient to everyone in the near future, on which to resume the hearing, proved unsuccessful. In order to avoid delay and with the consent of the parties we therefore directed that supplemental skeleton arguments should be filed within a specified time limit dealing with all the remaining matters. This was done and the members of this Appeal Tribunal have subsequently met in chambers, in order to consider and determine the appeal. We are grateful to both counsel for their assistance in this appeal, in relation to the preparation of skeleton arguments and their oral submissions.
4. The Relevant Background

The Applicant, Abi Adebayo, is of black African origin. After graduating in 1994 he worked as an interest rates derivatives trader in a Japanese bank and was regarded as a high achiever. He rose to the rank of Assistant Vice-President in 1998 and then worked in New York trading interest rate options. He joined the Appellants in July 2000 as a Senior Trader, working in UK Single Stock Options. From January 2002 he worked alongside the Appellants' existing UK Single Stock Options trader as a co-book runner. He then took it over as the sole book runner in April 2002, at which time it was making a loss. By the end of that year, however, the Tribunal found that he had turned a loss of 3.5 million pounds into a profit of 7.5 million pounds. In February 2003 he received a substantial bonus and he was then promoted to Director.

5. The Applicant's trading floor consisted of about 20 books run by traders, working in pairs and by country. The one exception to that rule was the UK Single Stock Option book, of which the Applicant was the sole trader. Of the Appellants' eight Equity Derivative traders on the Single Stock desk, seven were white European. The Applicant was the only black trader. Save for the other Director, Mr. de Angelis, who was Italian, all the other traders and managers were French nationals. Until the end of March 2003 the Applicant's line manager was Franck Lacour, who, as the Tribunal found, held the Applicant in high regard describing him as "a calm, rational and knowledgeable trader" who managed his book skilfully (paragraph 10(26)). After Mr. Lacour resigned his new line manager from April 2003 onwards was Areski Iberrakene, who reported to Christophe Chazot, the Head of Equity Derivatives.
6. Events then took a very different turn and the Tribunal's findings of fact as to what occurred between April and September 2003 lie at the heart of this appeal. In summary at this stage, as the Tribunal found, on 16^th April the Applicant was given a formal warning about a breach of the trading guidelines. On 28^th April he was suspended from his employment pending an investigation, Mr. Chazot informing the Applicant that he had concluded that he was deliberately mis-marking his book and understating his profit and loss. The investigation was carried out by Paul Henderson, Director of Compliance, Global Equities. In his report, produced on 4^th June, Mr. Henderson concluded that the Applicant had deliberately marked positions in the book in a way that effectively disguised trading losses; that the marking of the book did not conform to the required standards of marking; and that the matter should be dealt with under the bank's Performance and Conduct Procedure, because the Applicant was potentially guilty of gross misconduct. The disciplinary hearing took place on 10^th June. The Panel was Chaired by Martin Korbmacher, Deputy Global Head of Markets, who sat with Andrew Pullman, Human Resources Director, and Bharat Samani from Compliance. On 12^th June the Applicant was notified in writing that the Panel had concluded that he had failed to ensure that the UK Single Stock book was correctly marked and that he had done this deliberately. They therefore decided to dismiss him summarily for gross misconduct.
7. At the end of the hearing on 10^th June the Applicant had expressed to the Panel serious concerns about feeling "singled out" for disciplinary treatment in this way when, as far as he was aware, he had not managed his business differently or used different methodologies from those used by his trading colleagues, who were all white. He raised for the first time, and reluctantly ("I have to ask this question, I don't want to, but I have to") the question whether he was being discriminated against on grounds of race. He asked for his concerns to be investigated and Mr. Pullman told him that they would have to think about this. However, in his letter of 12^th June notifying the Applicant of his summary dismissal, Mr. Pullman informed the Applicant that these concerns were to be investigated separately.
8. The Applicant wrote at length on 19^th June, setting out grounds of appeal against the decision to dismiss him and criticising the fact that the decision had been taken without his complaint of race discrimination even being investigated. After some delay the Applicant was sent notice of an appeal hearing to be held on 15^th August. The appeal was heard by Stephen Sidebottom, head of Human Resources for the corporate finance business stream, and David Wenman, head of Equities. The Tribunal found this to have been a "brief meeting" (para 10(52)), which did not amount to a rehearing (para 19(22)). Amongst the documents sent to the Applicant in advance of the appeal was a two-page document said to be the "Findings of Further Investigation" into the Applicant's concerns about race discrimination. The Tribunal found this to have been compiled solely from a consideration of some documents by a junior member of the Human Resources Department, Jo Sumner, at the request of Mr. Sidebottom. There had been no interview with the Applicant to discuss his concerns. On 18^th September Mr. Sidebottom wrote to the Applicant dismissing his appeal. The only issue considered in the appeal process was the evidence of mis-marking by the Applicant from February 2003 onwards; and at no point in his letter did Mr. Sidebottom address the Applicant's concerns about race discrimination.
9. By 18^th September and in order to protect his position in relation to time limits, the Applicant had already presented his Originating Application to the Tribunal on 1^st September, complaining of race discrimination and unfair dismissal. Full particulars of his complaints were filed subsequently on 26^th November. These included, at paragraph 24, a complaint that his summary dismissal was wrongful and in breach of contract. Although this claim had not been included in the Originating Application, at the hearing the Tribunal allowed a late amendment to add it, the Appellants accepting that no prejudice had been caused to them as a result. No criticism is made of this ruling. Full particulars of the Applicant's complaints were provided in this ten-page document. He alleged, in relation to direct race discrimination, that he was treated less favourably than a white comparator was or would have been treated in that:

"(a) The Applicant was singled out by Mr Chazot and Mr Iberrakene in relation to allegations that he had mis-marked his book, suspended, subjected to disciplinary proceedings and then dismissed.

(b) The Applicant's allegation of race discrimination raised with the Respondent on 10 June 2003 was not investigated prior to his dismissal;

(c) Neither the Applicant's appeal against his dismissal, nor his race discrimination complaint were dealt with in a timely manner by the Respondent."

He identified his comparators as "the white members of the [Appellants']' team of London traders, alternatively a hypothetical white comparator" and alleged that the Appellants' less favourable treatment of him was on grounds of his race and/or colour. An additional allegation of victimisation was not in the event pursued. In their Notice of Appearance the Appellants provided only brief grounds of resistance, denying race discrimination and contending that the dismissal of the Applicant by reason of gross misconduct was fair.

10. Pursuant to section 65(1)(a) Race Relations Act 1976, the Applicant served a Questionnaire on the Appellants, dated 10^th October 2003, raising, at Appendix 2, 12 questions of the kind customarily seen in cases where allegations of direct discrimination have been made and requesting relevant information from the Appellants. Their brief reply, dated 22^nd January 2004 and completed on their behalf by the Appellants' solicitor, Mr. Dalgarno, was the subject of considerable criticism by the Tribunal, who described the answers as "at best … evasive".
11. At the hearing the Applicant himself gave evidence and called Fabrizio Maccallini, another Single Stock Options trader employed by the Appellants.
12. However, dismissal not being in dispute, the Appellants went first. They called only three witnesses, namely Paul Henderson, Andrew Pullman and Stephen Sidebottom. Neither Mr. Iberrakene nor Mr. Chazot was called; and the Appellants' failure to call both these witnesses and the other decision-makers on the Disciplinary Panel and at the appeal was the subject of adverse comment by the Tribunal. It is also relevant to note the Tribunal's finding at paragraph 14 that Mr. Dalgarno's closing submissions, on behalf of the Appellants, "substantially addressed the allegations of unfair dismissal". They were referring to the fact that the first eight of ten pages containing the submissions made on behalf of the Appellants addressed the unfair dismissal claim. The submissions relating to the race discrimination complaint, after setting out its history, occupied four paragraphs on pages 9 and 10.
13. The Tribunal's Findings of Fact

As is inevitable with complaints involving fact-sensitive allegations of discrimination, the Tribunal's lengthy findings of fact in this case are crucial to their Decision. They are set out at paragraphs 10(1) to (59) of the Extended Reasons. The key findings were as follows and, for convenience, we shall either summarise them or set them out verbatim where appropriate.

14. The system of work, the methodologies used and the Applicant's role are set out at paragraphs (7) to (13) as follows:

"(7) The Applicant's role was to provide liquidity and to make markets in UK based equity options. In other words, he used market information to generate prices where clients could buy and sell a variety of option structures. The clients were mainly internal and groups from within the Bank. The creation of markets in this place tends to leave an individual trader with risky positions that he can either leave on his book if he believes that they will generate a profit or hedge by executing a reverse trade or a trade in a future that is similar to the trade he has on his book. The process of hedging the book by using a similar underlying stock itself generates risk if that particular stock's price ceases to track the option that is sought to be hedged. The Respondent actively encouraged the traders to go to the market to take on risk and generate profit by correctly anticipating movement in stock and option prices. The options could either be bought with a view to being sold at another date in the future, called "going long", or a trader could sell an option for a stock that the trader does not own which is known as "going short".

(8) The precise value of options is not easy to determine. Because of the nature of the trade, the trader may only occasionally see a trade in the share price of the underlying stock that he is concerned with each day. For those reasons traders in this sort of market employ mathematical models to establish a fair price for the shares based on observed prices given by phone brokers in that commodity or a similar one. Options that are about to expire are easier to value than options that have a long time to expiry. Traders such as the Applicant bear the responsibility of providing the data used to value the option positions on their books. This data mainly comes from phone brokers and the traders are entitled to rely upon them to give indications of where the book should be valued.

(9) In order to compare prices to one another traders rely on a term described as implied volatility. Volatility is expressed as a percentage and indicates the value of an option. The volatility moves up and down with the market, much like share prices. The volatility is not published anywhere it is derived from mathematical models and different Banks will use different models to value the options. Information systems such as Bloomberg store option prices and use their proprietary models to derive implied volatilities. Sometimes options are quoted as a package - that is where the traders actually buys one options and sells a slightly similar option and that is a called a skew price.

(10) Within the Respondent's business the process of deriving options' implied volatilities are performed by the use of a pricing spreadsheet provided by the Respondent's Analysts. During the course of a trading month the trader keeps up to date with option trades in the market from the phone brokers and then takes those prices and uses the pricing spreadsheet to calculate the implied volatility. The trader will be given figures for what is called the bid-offer spread, namely the price at which the option will be bought or sold and depending on the information he receives he will change his options in the evaluation on his pricing spreadsheet to bring his positions within the bid offer spread. The traders are given a spot database in which they put in the prices obtained thus from the phone brokers.

(11) Such is the complexity of the mathematics involved in valuing derivatives of this type, due to the number of variables, that traders are required to calculate not merely a mathematical curve but a mathematical surface, that is a curve which varies along three axes of a graph. The curve is calculated by the traders to fit as many of the individual pieces of market information as possible and thus the shape of the surface is then used to predict the prices of options for which no immediate market data can be obtained. In this way, the traders mark the prices of the options by themselves and put in the prices they think are correct. The requirement is to mark within. The bid-offer spread and to form a view, which is often as much an art as a science, as to the fair valuation expressed as a figure. This process is known as marking to mid-market.

(12) At the end of each month the Bank carries out an independent price verification ("IPV") process: to provide a check on the prices provided by the traders in the book. Towards the end of the month, the traders go out actively to get quotes from brokers to make sure that on the last day of the month their significant position valuations was close to mid-market as possible. Those prices are submitted to an internal process called TOTEM which is the means by which financial control tests the traders' prices. In the event of there being a substantial discrepancy the trader may be asked to remark his or her book so that it more closely conforms to the result given by the IPV process. At the end of the month, traders are required to mark within half or one percent of the IPV ascertained values.

(13) Such was the size of the Applicant's book, actively encouraged and managed by his Managers, that taken overall a one percent shift in volatility made a difference in the order of ?6 million for the Bank's profit and loss (P/L) Account."

15. The Tribunal accepted the submission that the Applicant was a "patently honest witness" who "accepted his faults" and whose "evidence on technical issues was both compelling and deserving of belief" (see paragraph 19(25)). They found that throughout the time that he was managed by Mr. Lacour the Applicant had followed what he had understood to be the Bank's accepted process that, in marking during the course of the month, he had to mark within the bid offer spread. His evidence, which they accepted, was that there were circumstances in which the simple average figure within the bid offer spread was not necessarily a fair valuation of the market mid-price. If the bid offer spread was 24-28 per cent measured as implied volatility the average of 26 per cent would seem to represent the market mid. However, if the trader's individual position was such that he held a significant holding of one kind of option as against a much smaller or less valuable holding of another, the effect of the holding in the market would be such as to push the fair valuation towards either the bid or offer as the case may be. The Applicant's case throughout was that he understood that, provided he was marking within the bid offer spread, it would be acceptable. He accepted that he would have to mark closer to the mid price as the IPV date approached.
16. Whereas the Applicant had had no problems in January and February 2003, in March and April his book started to lose money. Shortly after the March month IPV process had ended his new line manager, Mr. Iberrakene, told him that there had been some problems on the valuation of some of his positions. The Applicant was surprised by that information as he had been diligent in marking his book properly and he had been informed previously that he had been well marked. Further, he had not observed significant changes in implied volatility between the end of February and the end of March 2003.
17. The position appeared to have arisen in relation to options he held in Vodafone. On 7^th April the Applicant submitted his broker quotes to Mr. Iberrakene. He kept all his email quotes in any event and provided them to the Bank as a matter of course. Having collated the broker quotes the Applicant accepted that it showed that the price and data he had provided that month was inaccurate and that his book needed to be re-marked. It was during the course of that re-marking process that the Applicant realized that the methodology he was using to estimate longer dated option prices had deviated from the market. In this process the Tribunal found that a technical problem with his pricing spreadsheet was identified, which was making him incorrectly value skew prices, but was never suggested to be his responsibility. The re-marking process began on 7^th April and continued until 16^th April.
18. The Tribunal found that on 16^th April, Mr. Iberrakene emailed to Mr. Chazot that it was recorded that the Applicant had been given a formal warning about breach of the trading guidelines which "are to be marked accurately within the bid offer spread at all times" and at that stage the Applicant continued to trade. When Mr. Chazot and Mr. Iberrakene met the Applicant it was decided between the three men that it was in the Bank's interests to try and reduce the size of the positions on the Applicant's book so that it would be easier to manage. There had previously been discussions about obtaining a co-trader or an assistant for the Applicant, but nothing had come of this. Thereafter, from 16^th to 28^th April, the Applicant tried to reduce his positions as required by his line manager. This proved very difficult because his option positions were very large, the market was weak and the Vodafone market was dropping and continued to drop. He found it very hard to persuade another bank to take on board his risk at a fair price. The removal of the loss-making positions would cost the Appellants even more money, because other institutions were in a similar position and there were very few traders left in the market who were willing to take on those positions without charging a significant sum for the favour. This effect, of a large number of institutions trying to do similar trades simultaneously and the Applicant in particular seeking to trade out a significant portion of his book, precipitated and continued a persistent downward trend in the value of the Applicant's option positions. As his book as a whole was structured in such a way that it made money whenever option values rose, this trend had the effect of generating even more losses on his book. This was a new experience for the Applicant. However, the Tribunal found that throughout this process the Applicant always kept Mr. Iberrakene and Mr. Chazot informed of his actions.
19. By the end of April Mr. Iberrakene had gone away on holiday and the Applicant was dealing directly on the telephone with Mr. Chazot in Paris. Despite the effect on the market the Applicant attempted to re-mark or revalue whenever the valuations were either lower than the market quoted in implied volatility bid level or higher than the implied volatility offer level. Because the market was falling, however, it was not always possible for the Applicant to follow that rule and the Tribunal found that he informed Mr. Chazot on each occasion when it occurred. The Applicant's reason for not having marked on the lower side of the mid point of the bid offer spread on those occasions was that the market was falling, his attempt to reduce his risk was a significant factor in causing that fall; and therefore if he were to mark it lower it would tend to cause the price to fall even further.
20. The matter became very serious and on 24^th and 25^th April the Applicant described the situation to Mr. Chazot as "desperate". He himself told Mr. Chazot that he thought the book was mis-marked and gave an indication of what it could cost to bring the valuations back into line. At paragraph (21) the Tribunal found that Mr. Chazot had said that on his return to London on 28^th April he would conduct a review of all the Applicant's positions. However, they found that on that day, 28^th April, the Applicant was suspended from his employment. Mr. Chazot told the Applicant that he had concluded that he was deliberately mis-marking and understating his profit and loss. Later on the Applicant had a meeting with Mr. Chazot and Miss Dingley from the Human Resources Department and was told that he was being suspended pending an investigation and a possible disciplinary hearing.
21. At paragraphs (23) to (36) the Tribunal make detailed findings of fact in relation to Mr. Henderson's investigation and his conclusions. Of particular relevance to the issues arising in this appeal are the following:

"a) Mr. Chazot was interviewed on 29^th April and was recorded as saying that on the previous day the Applicant had failed to offer an explanation as to the way in which his positions were marked.

b) At a meeting with Mr. Lacour on 30^th April, Mr. Lacour:

"Spoke very well of the Applicant, described him as managing his book skillfully and described him further as a calm, rational and knowledgeable trader. Mr. Lacour said he trusted the Applicant but he had marked his book slightly aggressively but nothing about that worried him. He said with regard to single stock positions 'we have methodologies on the Desk and we stuck to them and they worked for us'. Mr. Lacour said it was very rare to ask the Applicant to re-mark. He said further that you cannot re-mark all the time as the volatility is too huge. Mr. Lacour explained that not only was the book updated at a month's end but also within the month. He described it by saying 'that way you look at everything at least once a month, but big positions you should know all the time'. It was put to him that the Applicant would be on top of the top shelf positions of trading all the time and he agreed."

c) On 1^st May Mr. Henderson and Miss Dingley met the Applicant, who was accompanied by a companion, namely Mr. de Angelis who, the Tribunal noted, was not permitted at any stage to speak on behalf of the Applicant contrary to the Employment Rights Act 1999. At this meeting the Applicant explained what had happened in March, accepted that both Mr. Iberrakene and Mr. Chazot had made it clear that it was unacceptable and informed them that they had agreed that he should reduce the risk on his book.

d) On 8^th May, the day after Mr. Henderson had interviewed Mr. Iberrakene, there was a further interview with Mr. Lacour. On this occasion Mr. Henderson put to him a series of graphs which had been prepared comparing the Applicant's positions against positions derived from LIFFE data. During this discussion the Tribunal found that it was clear that Mr. Lacour was questioning the reliability of this LIFFE information as a means to test the Applicant's accuracy and the Tribunal observed that this was a reccurring theme throughout the case.

e) On 12^th May, Mr. Henderson interviewed the Applicant again, by which time the Applicant had been provided with the LIFFE graphs and was asked many questions by reference to them. The Applicant himself questioned the reliability of the data provided by the LIFFE graphs and stated that more accurate information could be obtained from the brokers. He informed Mr. Henderson that he had retained all the emails, which every dealer gets when the broker sends him the prices, and had forwarded them on to Financial Control. He stated that there was therefore no reason why in the circumstances he would be deliberately securing a huge discrepancy between the prices provided and the mark on his book. He further pointed out that both Mr. Iberrakene and Mr. Chazot were fully aware of the situation throughout. He consistently denied the allegation that he had deliberately hidden profit and loss or misrepresented the mark to market on the book.

f) Mr. Henderson listened to the transcripts of the Applicant's telephone records, but did not listen to or obtain transcripts of the telephone conversations between the Applicant and Mr Chazot.

g) In setting out his conclusions in his report Mr. Henderson set out the individual possibilities for the mis-marking of the book which he found to have occurred and analysed each one as not being a relevant factor in this case, save for the allegation of deliberate mis-marking. Firstly, in relation to the possibility that the Applicant was using or had been given inaccurate data Mr. Henderson included a note that copies of 1,000 plus emails and Bloomberg messages were retrieved and reviewed. However, the Tribunal found that it was clear from the Appendices to his report that in fact only some 40 of those results were actually analysed by him. Secondly, under the heading of insufficient data available to the Applicant to make an accurate assessment of the market, Mr. Henderson said that at no stage did the Applicant indicate that there was insufficient market data available to allow him to mark the book and that he was therefore worried about his marks. So far as being worried about his marks were concerned, however, the Tribunal found that it did not appear that Mr. Henderson was aware that Mr. Chazot was being told by the Applicant of difficulties on 24^th and 25^th April. Thirdly, under the heading of "genuine mistake" the Tribunal found that Mr. Henderson quoted selectively from the interview that he had with the Applicant and concluded that the incorrect marking of the book did not result from an isolated area or genuine misunderstanding of the mark to market policy.

h) At paragraph (36) the Tribunal record Mr. Henderson's conclusions as follows:

"'There are a number of factors each of which in isolation may not be cause for concern but when viewed collectively lead to the conclusion that the Trader has deliberately marked the Book in a manner that flattered the valuation of positions:

(a) The significant re-mark required at the April IPV on the Vodafone position (accepted as necessary by the Trader but indicating that the position had been marked well outside the accepted IPV tolerance).

(b) The systematic aggressive re-marking of those long and short positions in stocks such as HSBC, Barclays, Lloyds, BP and Shell.

(c) The manner in which the marking of Aviva was changed from mid April to end of April to show an ever increasing spread against Prudential. This re-marking was undertaken for no apparent reason despite the long history of the correlation between the two stocks.

(d) That the trader failed to update volatilities when it was clear from his own trading activity his volatilities were incorrectly marked...

(e) A comparison with the manner in which securities in a similar single stock book managed in Frankfurt shows positions being marked with a far greater alignment to market than achieved by the Trader.

(f) The data tabulated ... clearly shows a number of instances where the book was marked outside of quotes obtained from independent brokers.

Conclusion: The above analysis has led to the conclusion that the Trader has been deliberately mis-marking positions in the book for some time (certainly as far back as February and possibly beyond that date).

In the absence of information from the Trader himself it is only possible to speculate on the reason why the book has been mis-marked but it would appear that the overall trading strategy being followed was not working and the Trader sought to reduce the impact of this by deliberately marking the book in a manner that flattered the P&L as much as possible (i.e. without breaching the IPV Policy). This action was taken by the Trader notwithstanding the fact that Trading Management were aware and fully supportive of the trading strategy being followed by the Trader.'

Then having dealt further with management response and recommendations concerning IPV and management, in his recommendation Mr Henderson said this:

'In view of the conclusion that the Trader had deliberately marked positions in the book in a way that effectively disguised trading losses and that the marking of the book did not conform to the required standards of marking to market mid, the matter should be dealt with under the DrKW Performance and Conduct Procedure as the Trader is potentially guilty of gross misconduct.'"

22. At paragraphs (37) to (47) the Tribunal set out their findings as to what then took place at the disciplinary hearing and in view of their importance in this appeal we shall set them out here in full:

"(37) Although the final report was dated 4 June 2003, Mr Henderson, having obtained the input from Mr Chazot as to the way in which certain parts of it were expressed, the Respondent wrote to the Applicant on 30 May 2003 setting up a disciplinary hearing on 10 June 2003. On that day, Miss Dingley indicated that the report be produced to the Applicant as early as possible in the next week - that is the week commencing 2 June 2003.

(38) The hearing took place on the afternoon of 10 June 2003. The members of the panel were Martin Korbmacher who was the Chairman and had some background in single stock derivative trading, Mr Bharat Samani and Mr Andrew Pullman. Mr Pullman was a Human Resources Director and Mr Korbmacher was the Deputy Global Head of Markets and Mr Samani worked in Compliance. Mr de Angelis was expressly told that he was not present as an advocate.

(39) The hearing began by Mr Henderson explaining the background to his report and to his conclusions. Mr Adebayo asked some questions, first suggesting that an analysis of the London book's top 7 or 8 positions would show a similar pattern namely that there was a lot of intra-month volatility which disappears at the end of the month when the IPV process is about to start: When Mr Adebayo was asked to ask his questions about the report he said that he wanted to question one point on page 8 of the report which was a speculation that the problem had existed way beyond the period that Mr Henderson had considered. Mr Pullman appears to have intervened and said that would be disregarded.

(40) Mr Adebayo also explained the difficulties that he found with the LIFFE data and its inaccuracies. Mr Henderson confirmed that had not priced up every e-mail but searched the stocks for the data included in the table at B6 of the report. The Applicant made another point and Mr Pullman intervened and said: 'OK, anything else?' As a result Mr Henderson did not answer that question.

(41) Mr Adebayo explained by reference to the e-mail at page 105 that he was doing that which was required of him: to mark accurately within the bid offer spread at all times. Mr Pullman replied 'So what is the point you are making there?' Mr Adebayo replied:

'That as far as I was concerned the requirement is to be within the market bid offer. The problem in my book is that because of the size of the cross-vega it is very sensitive to the mark to market, so that you have a cross vega that is discounting skew and term structure, something in the order of 6 million euros so all it takes is one vol. to blow you out of by 6 million euros.'

(42) On page 291 Mr Korbmacher asked questions, particularly: 'how come it then looks like it was aggressively marked on both sides?' and concluded by asking: 'But what is your comment to the pattern, as I have said, in having the long positions marked aggressively and the short positions marked aggressively so that there was, implicitly there was this P&L smoothing effect?' Mr Adebayo replied:

'To be honest I don't really have a specific answer, all I would say was that it certainly wasn't deliberate. I think there is a natural tendency for you not to want to necessarily realise losses straight away. But that is just about the only explanation I could give, I was just basically being slow or unwilling to remark the marks.'

(43) At the end of the meeting Mr Adebayo was asked if there was anything he would like to say before the panel went away and deliberated. He complained about the way in which the matter had been handled and continued:

'I think that we are about six or seven weeks into when I was suspended, I think it was the 28^th April 2003 that I was suspended. It is almost 7 weeks into this process, and we still haven't come to a conclusion, but in many ways it is almost a foregone conclusion, because, in the market place, my name is effectively dirt, so my reputation has been shot to bits, so it is like I have been judged before sitting in front of a jury, so I don't see that as being fair.

I also, feel somewhat victimised and singled out, because l don't think the way in which I have managed my business has been spectacularly different from the way that I understood the colleagues I worked with in London operate, and just to clear my doubts, I would like an investigation into whether I am being discriminated against for reasons of colour or race, just to clear the debt, because I have sat at home for the last five or six weeks wondering why this is happening to me, I have worked very hard, I have tried to do my job as diligently as possible, why am I being singled out for this? I have to ask this question, I don't want to, but I have to.'

Mr Pullman replied: 'OK. We will then have to think about this.'

(44) The panel deliberated and received a phone call for Mr Chazot from Paris for about an hour that afternoon. The panel then separated and concluded its discussions by a telephone conference lasting about a further hour on the afternoon of the following day, 11 June 2003. The telephone conversation with Mr Chazot was extensive. A transcript of the conversation was made (596 - 600). It is clear from Mr Korbmacher's input into that conversation (597) that it was believed that the Applicant was not marking accurately within the bid offer spread. Mr Chazot said, 'What could be more precise than marking exactly in the middle of a bid offer' and also:

'... we have a number of examples of quotes which are given during the month of April and during the month of March where it is explicitly computered [sic] that Abi was far away from the bid offer, given by the broker market.'

Mr Korbmacher said:

'I think that the point that you are referring to was a specific transaction, a Vodafone transaction, where he traded 4.5 vol points away from where his book was marked, then I asked him then did you then re-mark your book, after you had done the trading and the answer was no. As far as I am concerned that is enough information for me, the main purpose of this was that this whole exercise could go a little bit further, which we do not know, and therefore, we need to be prepared for further, or an ongoing investigation of other books as well, as Abi chooses to behave that way. If he sticks to the statement that he made in that meeting, and that is the purpose of that call that we really stick to the points that we have observed.'

In Mr Chazot's final passage on page 660, he said:

'Now I think that Abi has himself has [sic] recognised through various discussions that he has had with Paul Henderson and yourself that he understood, what was the concept of the mean, and what was expected of him, and also he had a record of a discussion with Franck Lacour where Frank was saying that marking more than 1% from the mid was already something that was significant,' so from this discussion and others it is clear what the standard is and what was expected from people on this desk. If there were specific instructions to people not to mark at mid, I do not believe there is such a thing.'

(45) On 12 June 2003 Mr Pullman wrote to the Applicant (page 297 - 298) in which he said: 

'Our conclusion from the disciplinary hearing after fully considering the investigation, the appendices and all your comments is that you failed to ensure that the UK Single Stock book was correctly marked. Further, our decision is that you did this deliberately. The Bank has, therefore, decided to dismiss you summarily for gross misconduct from today.'

In setting out the reasons for that conclusion, Mr Pullman said:

'Your explanations for the mis-marks of the different stocks are not consistent and we have reached the decision that the overall mis-marking was clearly a systematic and deliberate policy of marking away from the market mid in order to flatter the P&L. We do not accept your statement that you believe that it is acceptable to mark the book within the bid offer spread.'

(46) In that letter, Mr Pullman also said:

'We will investigate separately the points you raised that you felt i) singled out and treated differently and ii) that you have been treated unfairly because of your colour. I will contact you under separate cover to tell you what action we will take in response to these claims. I also make the point that as an Equal Opportunities employer, we take any such allegation very seriously and will investigate accordingly.'

(47) The letter also recorded that the Applicant was dismissed without notice or pay in lieu of notice."

23. On 19^th June the Applicant wrote a long letter setting out his grounds of appeal against the Decision, suggesting that there was an inadequate investigation and that the Appellants did not have a policy in relation to the correct marking procedure. He stated:

"Although all Traders in London mark their books in the same way, I am the only Trader who has been suspended, subjected to disciplinary proceedings and now dismissed for this method of marking. I am also the only broker who is black. This, coupled with the lack of fair and thorough investigation, leads me to believe that I have been singled out and treated unfairly. I believe that this less favourable treatment is on the grounds of my race and/or colour …

I was shocked to read in your letter ...dismissing me, that you would "investigate separately" these points. How can the Bank be acting reasonably and fairly in considering the allegations against me and the appropriate sanction, without investigating the possibility of discrimination before reaching its decision.

... The decision to dismiss was taken without my complaint of discrimination even being investigated, yet you state in your letter that the Company takes any such allegation very seriously."

He alleged finally that the procedure was unfair and that the hearing was a foregone conclusion.

24. By letter of 14^th July to Mr. Sidebottom the Applicant complained that he had received no substantive response to his appeal letter and on 13^th August he received notice of an appeal hearing to be held on 15^th August, to be heard by Mr. Sidebottom and Mr. Wenham. Referring to what was said to be the "Findings of Further Investigation" into the Applicant's claim of discrimination, sent to the Applicant amongst other documents in advance of the hearing, the Tribunal found:

"So far as the latter document is concerned, that consisted of a two-page document (601 - 602) that Mr Sidebottom said had been compiled at his request by Jo Sumner a junior member of the Human Resources Department who in fact reported to Mr Pullman. It was common ground that, contrary to the Respondent's Equal Opportunities Policy, in relation to that part of the allegation that concerned the matters leading up to the disciplinary hearing there was no interview of the Applicant to discuss his allegation of discrimination. The document on pages 601 and 602 does not set out what investigation was carried out. It appears to have been compiled solely from a consideration of some documents. In addition, there is a paragraph indicating that from June 2002 to June 2003, a period chosen by reference to no relevant fact that we can ascertain, there were three situations where employees of the Respondent were suspended pending an investigation. The other three all appear to have been white European employees, two of them worked in Capital Markets as traders and were dismissed and a third appears to have been a Chauffeur who was suspended for one month. There was also an indication that a similar situation occurred with an Equity Derivatives trader, a white European, who in May 2001 was suspended for three weeks for mis-marking and was subsequently dismissed. Based upon that, Miss Sumner concluded that Mr Adebayo was not the first trader to be suspended and subjected to disciplinary proceedings and that on the face of it he did not appear to have been treated any differently to other employees in a similar situation. Miss Sumner's report indicated that the appeal would consider whether or not the decision taken to dismiss him reflected less favourable treatment on the basis of Mr Adebayo's race or colour."

Their findings in relation to the appeal, at paragraphs (52) to (55) were as follows:

"(52) There was a meeting between Mr Adebayo, Mr Wenham and Mr Sidebottom on 15 August 2003 and it appears from the note (pages 613 - 614) that it was a brief meeting and that all that happened was that Mr Adebayo's appeal points as set out in his letter were restated and amplified. In that meeting Mr Adebayo indicated that he wanted a similar analysis done on the other London-run books to see the basis upon which they had been marked. Under the heading 'Discrimination' it is recorded:

'AA concluded that he was discriminated against because he had been disciplined and everyone else behaved in the same way and had not. Everyone else also flatters their books.

AA claimed that if the P&L impact had been small he would never have been noticed. The investigation didn't address the P&L size, which he would understand and see as different, but his marking practice, which was the same as everyone else's. Being black is the only thing that differentiates him.

The process and investigation were not discriminatory, just the decision. His career has been destroyed because of an attitude to marking that isn't unique - there are no other factors that specifically point to discrimination.'

(53) On 28 August 2003 Mr Wenman had a meeting with Mr Chazot and Ms Dingley at which Mr Chazot was asked to comment on the reliability of the LIFFE data and the transcript of one of the meetings Mr Henderson had with Mr Lacour. Mr Chazot was asked to give his opinion again on why the mis-marking was said to be deliberate.

(54) On 18 September 2003 Mr Sidebottom wrote to the Applicant dismissing his appeal (page 611 - 612). According to Mr Sidebottom it was the evidence of mis-marking from February that was the only issue that the process had regard to. The Applicant was sent then, but had no opportunity to comment upon, the final meeting with Mr Chazot.

(55) Despite the extent of Mr Henderson's investigation, neither Mr Henderson nor Mr Pullman at the disciplinary hearing specifically identified the period that was under consideration. Mr Pullman conceded in evidence that the period of criticism of the mis-marking with which the disciplinary hearing was concerned was the period from 16 April to 28 April 2003, namely from the conclusion of the re-marking process as a result of which the Applicant had got a warning to 28 April when he had been suspended. This fact does not appear to have ever been communicated to the Applicant or indeed to Mr Sidebottom. Mr Sidebottom included this statement in the letter responding to. the appeal:

'We do not believe, as apparently you do, that you have been treated less favourably on the grounds of your race and/or colour. The variances were identified through the routine IPV process on 3^rd April 2003. These discrepancies were escalated in an entirely appropriate way. Following the IPV review Christophe Chazot worked with you to reduce the market risk associated with your book, and whilst doing so became concerned about the way you were marking. The subsequent investigation confirmed the suspicion of mis-marking. We do not see any evidence that the decision to investigate the variances, to work with you in re-marking the book, or to initiate disciplinary action in the light of identified marking anomalies were racially motivated.'

At no point in the appeal letter did Mr Sidebottom address the allegations of discrimination raised by Mr Adebayo concerning the decision to dismiss him."

25. The Tribunal then turned to the Applicant's questionnaire and, having referred to some of the questions he asked, found as follows at paragraphs (57) to (59):

"(57) In relation to all those questions the Respondent replied by saying that the document setting out the process of the investigation, the disciplinary process and its outcome had been disclosed and that those documents contained the relevant information.

(58) Believing that that was an inaccurate statement as to the contents of the documents already disclosed, solicitors for the Applicant wrote to the Respondent on 5 February 2004 pointing out that they did not consider that the documents that had been disclosed answered the question and in relation to 6.8, 6.9 and 6.10 saying that the answers to these questions were not contained in the documents. The Respondent's solicitors were asked to provide full answers.

(59) By a letter dated 25 February 2004 in relation to paragraph 6.4 the Respondent said that: 'The Applicant's treatment was in no way caused or affected by colour, race, nationality or ethnic or national origin. It is asserted that the treatment of the employee in Mr Adebayo's position would have been the same regardless of colour, race, nationality or ethnic or national origin and that that was how the Equal Opportunities Policy was applied.' In^-relation to paragraph 6.8 to 6.10 the Respondent replied by saying 'To the extent that the information sought is a proper request, the information has been disclosed in the document. To the extent that the request to go beyond that, if is a request for evidence.'"

At paragraph 16 the Tribunal record Mr. Dalgarno's statement that the failure to answer the questionnaire was his responsibility, because he had completed it on behalf of the Appellants.

26. Summarising the parties' submissions the Tribunal record at paragraph 15 Mr. Dalgarno's submission that the Appellants' decision to "press on" with the dismissal and to deal later on with the Applicant's request to investigate possible discrimination was certainly "a robust way to deal with it" but, even if regarded as unreasonable and unfair, was not discriminatory on racial grounds.
27. The Tribunal's Decision

The Decision on wrongful dismissal/breach of contract, which is not challenged in this appeal, was as follows:

"(25) So far as the wrongful dismissal was concerned, the Tribunal acknowledges that it is possible to find that an employee was unfairly dismissed and yet that such a dismissal was not wrongful. In support of this claim Mr Epstein relied upon the following facts. The Respondent's data as presented to the Tribunal does not demonstrate deliberate mis-marking. The Applicant was a patently honest witness. He accepted his faults and his evidence on technical issues was both compelling and deserving of belief. He had, when previously taxed with something that he had done wrong, accepted that he had done it wrong and owned to it. The evidence showed that the Applicant did not deliberately disguise his true marks but that he reported the matter to his Manager Mr Chazot at all times. He marked within the bid offer and when the market fell away and his marks were outside he reported that to Mr Chazot. On those facts, the Respondent could not say that whatever mis-marking occurred it was deliberate. The Applicant asked the Respondent to produce telephone records that were not available but which would have tended to exonerate him on the basis of what he told Mr Chazot. Neither of the managers who were dealing with the Applicant at that time - Mr Chazot or Mr Iberrakene - gave evidence to the Tribunal to contradict the Applicant's evidence. Mr Epstein made the further point that since the Bank had sustained an enormous loss by reason of the Applicant's market in Vodafone's future falling away the Tribunal should have at least some reservations concerning the reliability of Mr Chazot's evidence on the point since he would have been the person who would have carried responsibility for this were it not passed to the Applicant. For those reasons and on that basis the Tribunal concluded on the balance of probabilities that the Applicant was not in fact guilty of gross misconduct and his claim for breach of contract therefore succeeded."

In relation to Unfair Dismissal the Tribunal referred expressly to the well-known case of British Home Stores Limited v. Burchell [1978] IRLR 379 and to the parties' agreement that this was a case that fell clearly within the approach set down in that case. In relation to the race discrimination complaint the Tribunal directed themselves as to the relevant statutory provisions in the 1976 Act, namely sections 1(1)(a), 3(1) and (4), 4(2)(c), 54A and 65(2)(b) as follows:

"1. (1) A person discriminates against another in any circumstances relevant for the purposes of any provision of this Act if -

(a) on racial grounds he treats that other less favourably than he treats or would treat other persons;

3. (1) In this Act, unless the context otherwise requires-

'racial grounds' means any of tile following grounds, namely colour, race nationality or ethnic or national origins;

'racial group' means a group of persons defined by reference to colour, race, nationality or ethnic or national origins, and references to a person's racial group refer to any racial group into which he falls.

(4) A comparison of the case of a person of a particular racial group with that of a person not of that group under section 1(1) must be such that the relevant circumstances in the one case are the same, or not materially different, in the other.

4. (2) It is unlawful for a person, in the case of a person employed by him at an establishment in Great Britain, to discriminate against that employee -

(c) by dismissing him, or subjecting him to any other detriment.

54A. (1) This section applies where a complaint is presented under section 54 and the complaint is that the respondent-

(a) has committed an act of discrimination, on grounds of race or ethnic or national origins, which is unlawful by virtue of any provision referred to in section 1(1B)(a) ...

(2) Where, on the hearing of the complaint, the complainant proves facts from which the tribunal could, apart from this section, conclude in the absence of an adequate explanation that the respondent-

(a) has committed such an act of discrimination or harassment against the complainant, or

(b) is by virtue of section 32 or 33 to be treated as having committed such an act of discrimination or harassment against the complainant,

the tribunal shall uphold the complaint unless the respondent proves that he did not commit or, as the case may be, is not to be treated as having committed, that act.

65. (2) Where the person aggrieved questions the respondent (whether in accordance with an order under subsection (1) or not)-

(a) the question, and any reply by the respondent (whether in accordance with such an order or not) shall, subject to the following provisions of this section, be admissible as evidence in the proceedings;

(b) if it appears to the court or tribunal that the respondent deliberately, and without reasonable excuse, omitted to reply within a reasonable period or that his reply is evasive or equivocal, the court or tribunal may draw any inference from that fact that it considers it just and equitable to draw, including an inference that he committed an unlawful act."

They also directed themselves as to the guidance given recently by this Appeal Tribunal in the sex discrimination case of Barton v. Investec Henderson Crosthwaite Securities Limited [2003] ICR 1205, following similar legislative amendments to the Sex Discrimination Act 1975 dealing with the burden of proof, on how Tribunals should now approach the determination of claims of direct discrimination, as follows:

"'We therefore consider it necessary to set out fresh guidance in the light of the statutory changes:

(1) Pursuant to s.63A of the Sex Discrimination Act 1975, it is for the applicant who complains of sex discrimination to prove on the balance of probabilities facts from which the tribunal could conclude, in the absence of an adequate explanation, that the respondents have committed an act of discrimination against the applicant which is unlawful by virtue of Part 11 or which by virtue of s.41 or 42 SDA is to be treated as having been committed against the applicant. These are referred to below as "such facts".

(2) If the applicant does not prove such facts he or she will fail.

(3) It is important to bear in mind in deciding whether the applicant has proved such facts that it is unusual to find direct evidence of sex. discrimination. Few employers would be prepared to admit such discrimination, even to themselves. In some cases the discrimination will not be an intention but merely based on the assumption that "he or she would not have fitted in".

(4) In deciding whether the applicant has proved such facts, it is important to remember that the outcome at this stage of the analysis by the tribunal will therefore usually depend on what inferences it is proper to draw from the primary facts found by the tribunal.

(5) It is important to note the word is "could". At this stage the tribunal does not have to reach a definitive determination that such facts would lead it to the conclusion that there was an act of unlawful discrimination. At this stage a tribunal is looking at the primary facts proved by the applicant to see what inferences of secondary fact could be drawn from them.

(6) These inferences can include, in appropriate cases, any inferences that it is just and equitable to draw in accordance with s.74(2)(b) of the Sex Discrimination Act from an evasive or equivocal reply to a questionnaire or any other questions that fall within s.74(2) of the Sex Discrimination Act: see Hinks v Riva Systems EAT/501/96.

(7) Likewise, the tribunal must decide whether any provision of any relevant code of practice is relevant and if so, take it into account in determining such facts pursuant to s.56A(10) SDA. This means that inferences may also be drawn from any failure to comply with any relevant code of practice.

(8) Where the applicant has proved facts from which inferences could be drawn that the respondents have treated the applicant less favourably on the grounds of sex, then the burden of proof moves to the respondent.

(9) It is then for the respondent to prove that he did not commit, or as the case may be, is not to be treated as having committed that act.

(10) To discharge that burden it is necessary for the respondent to prove, on the balance of probabilities, that the treatment was in no sense whatsoever on the grounds of sex, since "no discrimination whatsoever" is compatible with the Burden of Proof Directive.

(1I) That requires a tribunal to assess not merely whether the respondent has proved an explanation for the facts from which such inferences can be drawn, but further that it is adequate to discharge the burden of proof on the balance of probabilities that sex was not any part of the reasons for the treatment in question.

(I2) Since the facts necessary to prove an explanation would normally be in the possession of the respondent, a tribunal would normally expect cogent evidence to discharge that burden of proof. In particular, the tribunal will need to examine carefully explanations for failure to deal with the questionnaire procedure and/or code of practice.'"

28. It is common ground that the Tribunal accurately set out the relevant statutory provisions and the relevant dicta in the Barton case. Mr. Linden's main challenge on behalf of the Appellants proceeds on the basis: (a) that the Tribunal followed the Barton guidelines so slavishly that they lost sight of the central question they had to decide in this case, namely whether the Appellants had treated this Applicant less favourably on racial grounds; and (b) that the guidelines given by this Appeal Tribunal in Barton are unhelpful and incorrect in a number of respects; and they create the risk that a Tribunal, in seeking to apply them, will become distracted from their task of deciding that "central question" in each case. We shall return to these criticisms below.
29. The Tribunal's conclusions on race discrimination appear at paragraphs 19(1) to (15) as follows:

"(1) The Applicant was the only black trader of and that the other traders in the Respondent's employment were white.

(2) The Respondent had no written Policy as to the marking of books by the traders. The evidence of the Applicant, which the Tribunal accepted, showed that other traders marked their books in the same way that the Applicant did. It was substantiated by the fact that the Applicant worked as a co-book runner from 1 January to April 2002 where he learned that practice and was under the supervision of Mr Lacour. It was consistently maintained by the Applicant's statements at the disciplinary hearing and in the investigation leading to it as well as at the appeal. It was confirmed by Mr Maccallini's evidence to the same effect. It was confirmed also by the fact that whilst the Applicant was away from work for any reason, his book was managed by Mr Lacour and Mr Maccallini. It is apparent that Mr Lacour made no complaint about the way in which the Applicant's book was marked.

(3) The reliance by the Respondent on the IPV process and the LIFFE comparison did not dispel the indication that the traders mark their books in the same way as the Applicant. That part of the Applicant's case was not specifically investigated by the Respondent at any stage. The information to the contrary effect came from Mr Chazot. The Tribunal postulated, as to Mr Chazot himself, bearing in mind of the enormous losses, flowing from the collapse of the Vodafone market which he had been managing in the sense that he managed the Applicant, might not have persuaded him to take more drastic action than the warning that was given in April 2003 once the losses were realised. However, the Respondent did not call Mr Chazot nor anybody else familiar with dealing on the Applicant's trading floor at the material time to produce evidence to the contrary.

(4) The Respondent appears to have been concerned primarily by the size of the discrepancy, measured in millions of pound's, and by the effect of what the Applicant did.

(5) The Respondent decided to dismiss the Applicant who complained that race discrimination might have played a part in the decision to single him out for a disciplinary procedure without ever investigating that complaint before the dismissal decision was reached.

(6) The investigation into the allegation of race discrimination was inadequate. The Respondent called no evidence from Miss Sumner who made the report. There was no documentary evidence that it complied with the Respondent's Equality Opportunities Policy. Ms Sumner conducted no interviews. She did not discuss it with the Applicant. She does not appear to have looked at the marking approach of the other London traders or taken that into consideration in reaching her conclusion. 

(7) Mr Sidebottom wholly failed to investigate the Applicant's complaint that the allegations of race discrimination were not considered before his dismissal. It is clear from the notes of the appeal hearing that it did not figure in his consideration of the appeal.

(8) The Respondent has an Equal Opportunities Policy which provides that when an allegation of discrimination is made the relevant people will be interviewed. The Applicant was not interviewed about that at all. Mr Sidebottom accepted that at the appeal hearing there was no engaging by way of debate with the Applicant as to what he was complaining about. The purpose of the appeal hearing, he said, was to listen to the Applicant's appeal and then to go away and make a decision. That approach, where an allegation of discrimination is made does not begin to amount to compliance with the Equal Opportunities Policy. It is no answer to an allegation of a breach of Policy of this nature to say that the Applicant had not identified the people about whom he was complaining. The difficulties, acknowledged by Mr Dalgarno, in making a complaint of discrimination and in dealing with it properly, do not seem to the Tribunal to justify the Respondent stopping short of asking a complainant about who he is making the complaint. Yet the Respondent did not even do that.

(9) The answers by the Respondent to the specific questions in the Race Relations Questionnaire that we have identified can at best be described as evasive. But for Mr Dalgarno's frankness, the Tribunal could have reached the conclusion that there was a deliberate decision not to answer those questions properly. Clearly, to say that the information requested had already been provided, when it has not been so provided is evasive.

(10) In the light of those conclusions the Tribunal found that the Applicant had established the first stages of the Barton v Investec Securities guidelines. The Applicant had, on those conclusions, proved on the balance of probabilities facts from which the Tribunal could conclude, in the absence of an adequate explanation, that the employer had committed an act of discrimination. Accordingly, the burden of proof moved to the employer.

(11) It is necessary for an employer to prove on the balance of probabilities that the treatment was in so sense whatsoever on the grounds of race. The Tribunal is required to asses then not merely whether the employer has proved an explanation but further that it is adequate to discharge the burden of proof on the balance of probabilities and we call to mind the fact that the Tribunal would normally expect cogent evidence to discharge the burden of proof in this case.

(12) We asked ourselves whether there was evidence or facts from which the Tribunal could infer that race was in no sense whatsoever the basis for this decision. The Tribunal at once recognised a very real difficulty -That is that we did not hear evidence from Mr Korbmacher, Mr Samani or Mr Wenman.

(13) The evidence of both Mr Pullman and Mr Sidebottom, the Human Resources officers, whom one would presume to be the more skilled and experienced in equal opportunities issues, was unsatisfactory ina number of respects. Each one failed to consider and presumably to advise the other members of the disciplinary and appeal panels as to the way in which claims of race discrimination or allegations of race discrimination should properly be considered. That Mr Sidebottom should have considered that Miss Sumner's document was an appropriate response to an allegation of race discrimination was astounding.

(14) On behalf of the Applicant Mr Epstein simply submitted that the Respondent has not proved that discrimination was in no sense whatsoever the reason for the Applicant's treatment. Mr Dalgarno's submission, with the greatest possible respect, amounted to little more than a reassertion of the Respondent's case that the Applicant was guilty of misconduct. We recognised the difficulty that a party who is required to prove a negative faces.

(15) We considered that three particular factors were relevant here:

(a) the absence of evidence from those involved in the decision-making process;

(b) the unsatisfactory evidence of Mr Pullman and Mr Sidebottom;

(c) the evasive answers to the Questionnaire.

The Respondent failed to provide the cogent evidence for which we looked. The unsatisfactory and inadequate process for dealing with the allegations of discrimination once raised and the answers to the Questionnaire led us, on the balance of probabilities, to find that the Respondent failed to prove that race was in no sense whatsoever part of the reason for the decision to discipline and dismiss the Applicant. The further allegations concerning delay in the process, it seemed to us were subordinated into the substantive allegations."

30. Their conclusions on Unfair Dismissal followed at paragraphs (16) to (24):

"(16) We considered the question of unfair dismissal. It was accepted by the Applicant that the Respondent had a genuine belief in the Applicant's guilt.

(17) Was the Respondent's belief based upon reasonable grounds? On the balance of probabilities the Tribunal was persuaded that it was not. The Respondent was faced with a trader who was commended and praised and valued up until early 2003. He was taken over by a new Manager and he carried on with the trading policy that had previously been approved. He had marked his book in accordance with his Manager's policy. When Mr Chazot, the new Manager, raised issues with it the report, as Mr Epstein submitted, failed to present a fair or balanced picture of either of the claims and the defences. In particular, the period was not for which the default was said to have occurred was not properly identified.

(18) Mr Henderson's report, at best, failed, and at worst misrepresented the Applicant's position. It was clear that Mr Henderson did believe and profoundly believed that his comparison of the LIFFE figures in the graphs was appropriate. It was a substantial part of the basis for his conclusion leading to the recommendation that the Applicant be found guilty of gross misconduct. The Applicant raised reasonable points in relation to it which the Respondent replied to by saying that at the time of the report various people said that it was reliable. Such a contention is contained in the report. Mr Henderson did not include any background evidence in relation to it. Mr Henderson did not even see fit in his witness statement to this Tribunal to respond to the challenges made to it by the Applicant. The only conclusion the Tribunal can draw was that it was not considered in substance at the time of the report at all and furthermore the suggestion that the Applicant's case was fully considered and extensively deliberated on was undermined by the evidence of the conversation with Mr Chazot. There was no substantive reason advanced as to why Mr Henderson had selectively taken the Applicant's broker quotes to price in the investigation.

(19) The question of whether the Respondent had a reasonable ground for their belief, that the mis-marking was deliberate was crucial to the Tribunal's consideration of the case. The Applicant had no motive to do the mis-marking. He made it clear time and again in the investigation process that it would be irrational to do so. He was under close scrutiny from Mr Chazot at the time and the Applicant had no reason to benefit personally from mis-marking and any discrepancy was bound to be picked up on the IPV process. The Applicant had no reason to fear that he was running his book at a loss at that particular time. He was a highly successful trader and if a market falls away and a particular trader is over-exposed the fault is probably one of management strategies, which the Respondent acknowledged.

(20) In all the circumstances the Tribunal was not satisfied that the Respondent's belief was based on reasonable grounds.

(21) There were procedural concerns as well. So far as the disciplinary hearing was concerned it is clear that the Applicant was in double jeopardy in respect of the early April 2003 marks after informal warnings as those were matters that were taken into account. The disciplinary hearing did not ask the Applicant a single question about his reservations about the use of the LIFFE date - that matter was not even put to Mr Chazot in the subsequent telephone conversation. The disciplinary hearing did not seek to price the Applicant's broker quotes, which was possible from his spreadsheet, neither did they obtain quotes for the work he had in fact done for Alan Burnett. The evidence of the broker quotes was not presented to the Applicant in advance of the hearing. The allegation of race discrimination was not investigated out prior to the decision being taken to dismiss him. The other London books were not examined which would have shown whether the Applicant's contention was right or wrong. The Applicant did not have any opportunity to comment on the evidence taken over the telephone from Mr Chazot. The Applicant's criticism of the LIFFE data appeared to have considerable substance based upon his evidence and that of Mr Maccallini. It was also clearly brought into doubt by Mr Lacour.

(22) The appeal itself could not be said to have amounted to a re-hearing and as such could not have remedied the defects of the investigation thus far previously identified.

(23) The dismissal letter did not make it clear that the Applicant was not found to have been dishonest. It did not make it clear that he was only found guilty of deliberately mis-marking in relation to certain options and only from 14 to 28 April 2003. The conclusion in the dismissal letter that the Applicant was in breach of FSA Principle 1 when that was not put to the Applicant - he was unaware that he faced such an allegation - was itself unfair.

(24) In all those circumstances the Tribunal found that the dismissal was both procedurally and substantively unfair."

31. The Law

Section 54A of the Act, set out above, was added by the Race Relations Act 1976 (Amendment) Regulations 2003, enacting Council Directive 2000/43/EC of 29^th June 2000, which implements the principle of equal treatment between persons irrespective of their racial or ethnic origin. The Preamble to the Directive emphasises, amongst other things, the need to provide an effective level of protection for those who have been subject to discrimination based on racial and ethnic origin and, in this respect, to the fact at paragraph (21) that:

"The rules on the burden of proof must be adapted when there is a prima facie case of discrimination and, for the principle of equal treatment to be applied effectively, the burden of proof must shift back to the Respondent when evidence of such discrimination is brought."

The Directive is said at paragraph (25) to lay down:

"Minimum requirements, thus giving the Member States the option of introducing or maintaining more favourable provisions. The implementation of this Directive should not serve to justify any regression in relation to the situation which already prevails in each Member State."

Article 8 dealing with the Burden of Proof provides, so far as is relevant:

"8.1 Member States shall take such measures as are necessary, in accordance with their national judicial systems, to ensure that, when persons who consider themselves wronged because the principle of equal treatment has not been applied to them establish, before a court or other competent authority, facts from which it may be presumed that there has been direct or indirect discrimination, it shall be for the Respondent to prove that there has been no breach of the principle of equal treatment.

…

8.5 Member States need not apply paragraph 1 to proceedings which it is for the court or competent body to investigate the facts of the case."

In relation to Article 8.5 Employment Tribunals are adversarial, not inquisitorial and paragraph 8.1 therefore applies.

Council Directive 97/80/EC had earlier dealt with the burden of proof in cases of sex discrimination and section 63A of the Sex Discrimination Act 1975 was introduced to give effect to this Directive. It mirrors the provisions of section 54A of the Race Relations Act.

32. Prior to the implementation of these European Directives, the approach adopted by Employment Tribunals in determining whether direct discrimination had occurred in any particular case, was for many years that laid down by the Court of Appeal in the case of King v. Great Britain China Centre [1991] IRLR 513; and in particular the frequently quoted passage in the judgment of Neill LJ at page 518, as follows:

"(1) It is for the applicant who complains of racial discrimination to make out his or her case. Thus if the applicant does not prove the case on the balance of probabilities he or she will fail.

(2) It is important to bear in mind that it is unusual to find direct evidence of racial discrimination. Few employers will be prepared to admit such discrimination even to themselves. In some cases the discrimination will not be ill-intentioned but merely based on the assumption that 'he or she would not have fitted in'.

(3) The outcome of the case will therefore usually depend on what inferences it is proper to draw from the primary facts found by the tribunal. These inferences can include, in appropriate cases, any inferences that it is just and equitable to draw in accordance with s.65(2)(b) of the Act of 1976 from an evasive or equivocal reply to a questionnaire.

(4) Though there will be some cases where, for example, the non-selection of the applicant for a post or for promotion is clearly not on racial grounds, a finding of discrimination and a finding of a difference in race will often point to the possibility of racial discrimination. In such circumstances the tribunal will look to the employer for an explanation. If no explanation is then put forward or if the tribunal considers the explanation to be inadequate or unsatisfactory it will be legitimate for the tribunal to infer that the discrimination was on racial grounds. This is not a matter of law but as May LJ put it in North West Thames Regional Health Authority v Noone [1988] IRLR 195, 198, 'almost common sense'.

(5) It is unnecessary and unhelpful to introduce the concept of a shifting evidential burden of proof. At the conclusion of all the evidence the tribunal should make findings as to the primary facts and draw such inferences as they consider proper from those facts. They should then reach a conclusion on the balance of probabilities, bearing in mind both the difficulties which face a person who complains of unlawful discrimination and the fact that it is for the complainant to prove his or her case."

This passage was subsequently approved in Glasgow City Council v. Zafar [1998] ICR 120, by the House of Lords, who acknowledged "the special problems of proof" presented for those complaining of discrimination, "… since those who discriminate on the grounds of race or gender do not in general advertise their prejudices; indeed they may not even be aware of them". (See the speech of Lord Browne-Wilkinson at page 125C). They emphasized, however, that Employment Tribunals were not bound as a matter of law to draw the inference that there was less favourable treatment on racial grounds where an employer had acted unreasonably and had offered no or no satisfactory explanation for such treatment. Rather, Tribunals had a discretion in deciding whether to draw such inferences, and in drawing such inferences as they considered proper from their findings of primary fact on the evidence.

In a number of other cases, decided prior to the legislative changes, the Appellate Courts have made further observations on the correct approach to be adopted by Tribunals in this area, having regard to the particular factual matrix before them; see, for example, Anya v. University of Oxford [2001] ICR 1205 CA and The Law Society v. Bahl [2003] IRLR 640 EAT.

33. In our judgment, there is no doubt that section 54A and section 63A of the respective Acts introduced a new approach to determining complaints of direct discrimination, which meant that the King guidelines required adjustment, as this Appeal Tribunal recognised in the case of Barton. Having regard to Mr. Linden's criticisms of the guidance in Barton we wish to make the following general observations on the effect of the legislative changes, in the light of some of his submissions.
34. Pursuant to section 54A the first stage of the process is for the Tribunal, having heard all the evidence, to determine the primary facts proved by the applicant, in order to see what inferences, or secondary facts, could be drawn from them, from which they could conclude that an unlawful act of racial discrimination had been committed, absent any explanation from the employers. Such inferences could include, for example, inferences which can legitimately be drawn from an employer's evasive or equivocal replies to a questionnaire, pursuant to section 65(2)(b) of the Act.
35. This does not mean, in our view, that in a case involving alleged race discrimination, it will be sufficient at this first stage for an applicant who is black simply to show, for example, that a white comparator was promoted to a post for which he had applied. In view of the "like for like" requirement in section 3(4) and the need for the relevant circumstances in the applicant's case to be the same or not materially different in the case of the comparator, the applicant in such a case would have to show not only that he met the stated qualifications for promotion to the post, but that he was as least as well qualified as the successful candidate. The relevant information as to the successful candidate's qualifications could be obtained in the usual way, through correspondence or using the questionnaire procedure.
36. On such facts, assuming that the applicant could show this to be the case, an Employment Tribunal could conclude that an act of racial discrimination had been committed, absent any explanation from the employers as to why they had promoted the white candidate. The important word in the section is "could". At this first stage the Tribunal has only to conclude that the facts found could lead them to the conclusion that there had been unlawful discrimination.
37. If the Tribunal has made this determination they proceed to the second stage, when the burden of proof will move to the respondent employer to prove on the balance of probabilities that he did not commit or, as the case may be, is not to be treated as having committed the act of unlawful discrimination. If the Tribunal find that this burden is not discharged, they "shall", i.e. must find that the respondent has unlawfully discriminated against the applicant. This, in our judgment, represents a significant change from the previous approach established in the cases of King and Zafar. The discretion afforded to a Tribunal to draw an inference that an employer had unlawfully discriminated on grounds of sex or race only if they considered it legitimate in all the circumstances to do so, having regard to the primary facts, has now gone. If the employer fails to discharge the burden of proof placed upon him at this second stage, the Tribunal are compelled by statute to uphold the complaint that he has discriminated.
38. Returning then to the factual example referred to above, if the employers in that case can show on the evidence that a transparent selection system, fairly carried out, resulted in a decision to promote the white candidate to the job for valid, non-discriminatory reasons, they will have discharged the burden placed upon them of proving on the balance of probabilities that they did not discriminate against the Applicant on racial grounds. If, however, the employer's explanation is, for example, that the Applicant was regarded as someone who would "not fit in" to a department where the entire workforce is white, or if the selection system in place is wholly lacking in transparency and either no or no adequate, non-discriminatory explanation for promoting the white candidate is shown, it is likely that the employer will be found not to have discharged the burden of proof upon him and the Tribunal shall then uphold the complaint that unlawful discrimination has occurred. Inevitably, the outcome in individual cases will turn on their own particular facts and on the evidence called, both by the Applicant, who must prove the primary facts and by the employers who, if a prima facie case is shown, will find themselves having to prove that they did not discriminate on grounds of sex or race.
39. There is, in our view, a tension to be detected in the previous case law, where these issues have arisen, between the need to recognise and address the special problems of proof for victims of discrimination, in particular when the discriminators might not themselves be aware that they have discriminated, and the need to avoid the non-discriminating but incompetent or unreasonable employer being wrongly labelled with the stigma of having committed an act of race or sex discrimination. This tension has been addressed, in our judgment, by the legislative reversal of the burden of proof, which now places firmly upon an employer the burden of proving to the civil standard that he has not unlawfully discriminated against an employee when, on the facts found, a Tribunal could conclude that he had; and when, if he fails to discharge that burden, a Tribunal must conclude that he has. The statutory amendments clearly reflect the European emphasis on effective protection for those who are the victims of discrimination, and the need for the principle of equal treatment to be applied effectively. Whilst they demonstrate a significant change of approach however, the combined experience of all the members of this Appeal Tribunal suggests that they will not result in the placing of an unduly onerous burden on employers who have in place appropriate and transparent workplace systems and practices; and who conduct their businesses in accordance with what are now well accepted and established equal opportunities policies and procedures.
40. It will make no difference to the Tribunal's approach, in our view, where, as here, the Complainant also has an unfair dismissal claim and where the employers therefore call their evidence first, dismissal not being in dispute. The primary facts will clearly be relevant to both complaints and, with the effective case management now being practised by Tribunals including the exchange of witness statements and appropriate orders for disclosure, the Tribunal will, by the date of the hearing, be well aware of the issues to be decided and the burdens of proof imposed on the parties by the different legislative provisions.
41. The guidance given by the EAT in Barton has since been the subject of comment in further decisions of this Appeal Tribunal, to which we must now refer. In University of Huddersfield v. Wolff [2004] IRLR 534, the EAT (Burton P. presiding) referred to the "very helpful" decision in Barton and adopted the guidance there set out. In upholding the applicant's complaint of sex discrimination an Employment Tribunal had concluded: "We are applying the statutory provisions and we do so in the light of the fact that once we have determined that there is an ostensible act of discrimination in that the Applicant has been less favourably treated and there is a difference in sex, we are required to look at the explanation given by the Respondent. We are required to uphold her complaint unless we are satisfied on the basis of the explanation that the Respondent proves that it did not commit the act complained of". This was held, rightly in our view, to be a mis-direction and the tribunal were held to have erred in finding that the burden of proof had transferred to the employers. The tribunal had not concluded, in accordance with section 63A of the 1975 Act, that the Applicant had proved facts from which inferences could be drawn that the employers had treated the Applicant less favourably on the grounds of sex. At paragraph 28 of the judgment the EAT said:

"Once the burden is reversed, of course, the burden falls upon the Respondent in the manner described … in Barton and the explanations have to be looked at. It is the more important that there be appropriate findings on the basis of which the prima facie case of less favourable treatment on the grounds of sex is made and, of course, above all that there is such a prima facie finding, because it is only once there is such a finding that the Respondent knows, and thus the Tribunal knows, what the Respondent has to justify."

42. Subsequently, in Chamberlin Solicitors v. Emokpae [2004] IRLR 592, the EAT (Judge McMullen QC presiding) dismissed an appeal from an Employment Tribunal's decision in favour of an applicant on sex discrimination. They decided that Barton remained good law, subject to their comments in relation to guidelines (10) and (12), where they said this, at paragraphs 32 to 38:

"32

…..We take, first, the criticism of the passage in guideline (10) which is founded on the Burden of Proof Directive. It was submitted by Mr Purchase that the tribunal had misconstrued the use of the words 'no discrimination whatsoever' in the Directive: that phrase does not concern the definition of, or the ingredients in, discrimination, but merely the forms of discrimination. We accept that submission. Where the phrase appears both in the Burden of Proof Directive and in the Equal Treatment Directive, it is followed by the words 'either directly or indirectly' which are words qualifying the term 'discrimination.'

33

The EAT in Barton appears to have been led to its conclusion by consideration of Article 2(1) of the Burden of Proof Directive (97/80/EC) which provides as follows:

'For the purposes of this Directive, the principle of equal treatment shall mean that there shall be no discrimination whatsoever based on sex, either directly or indirectly.'

34

That formulation of the principle of equal treatment derives from the Equal Treatment Directive (Directive 76/207/EEC), Article 2(1) where the phrase 'no discrimination whatsoever on grounds of sex ...' first appears. Prior to the change in the burden of proof, pursuant to the Burden of Proof Directive and s.63A, it had already been decided in Nagarajan that there may be a range of causes contributing to discrimination, for Lord Nicholls said as follows:

'decisions are frequently reached for more than one reason. Discrimination may be on racial grounds even though it is not the sole ground for the decision. A variety of phrases, with different shades of meaning, have been used to explain how the legislation applies in such cases: discrimination requires that racial grounds were a cause, the activating cause, a substantial and effective cause, a substantial reason, an important factor. No one phrase is obviously preferable to all others, although in the application of this legislation legalistic phrases, as well as subtle distinctions, are better avoided so far as possible. If racial grounds or protected acts had a significant influence on the outcome, discrimination is made out.'

35

When transposing the Burden of Proof Directive into s.63A of the Sex Discrimination Act, Parliament did not intend to change the forms or the definitions of discrimination. The change in the burden of proof in direct discrimination, at least, is designed to remove some of the obstacles in the way of applicants. In the 1976 Directive the forms are direct and indirect (Article 2), and victimisation (Article 7). In the Act, they include discriminatory practices, instructing and pressurising others to discriminate, aiding discrimination and constructive and vicarious liability for others' discrimination (ss.37-42). Directive 2002/73 amends the 1976 Directive. In it, the forms and definitions include harassment, sexual harassment and instructions to discriminate. It must be transposed into our law by 5 October 2005. In both the earlier Directives where the word 'discrimination' appears, it means any form of discrimination, direct or indirect, and (by reference to Article 7) victimisation. Thus sex discrimination in all its forms is unlawful.

36

Where the respondent produces no adequate explanation for facts which the applicant has proved could amount to discrimination, the burden is transferred to the respondent of proving that it did not commit, or is not to be treated as committing, the act of discrimination. If it fails, it is taken to have 'committed an act of discrimination'. As we have pointed out, since the House of Lords decided Nagarajan, discrimination is unlawful if gender has a significant influence on the decision.

37

Although considering race discrimination, the authorities cited by Lord Nicholls were based on sex discrimination. Given that there should be no difference in treatment of the same statutory language, it follows that for the purposes of sex discrimination, less favourable treatment is unlawful only if gender has a significant influence on the decision. So if it is a very small factor amongst a large number of predominant factors, it will not be a reason for the treatment. The principle of equal treatment in the Equal Treatment Directive applied in the Burden of Proof Directive does not require the eradication altogether of gender in a decision making process, merely its downgrading. In such a case, there will be 'no discrimination whatsoever' because gender had no significant influence on the decision.

38

We do not consider the EAT in Barton was saying that that account of the law was changed to require the respondent to show gender had no effect whatsoever in the decision. Nagarajan was cited in the skeleton arguments and is anyway the leading authority well-known to the EAT. It was not distinguished. In order to make this clear, for we accept there may be misunderstanding, we respectfully suggest that guideline (10) in Barton should be adjusted to read as follows:

'To discharge that burden it is necessary for the respondent to prove, on the balance of probabilities, that the treatment was not significantly influenced, as defined in Nagarajan v London Regional Transport [1999] IRLR 572, by grounds of sex.'

Further, in relation to guideline (12) the EAT stated as follows at paragraph 40:

"40

We are also asked to consider guideline (12) which requires 'cogent evidence' to be adduced by a respondent shouldering the transferred burden, once a prima facie case has been made out by the applicant. The EAT in Barton justified this expression on the basis that the material facts necessary to prove this would be in the hands of the respondent. 'Cogent' means forceful or persuasive. Guideline (12) is the correct statement of the law, if we may respectfully say so, and so is the justification. Facts and arguments which are forceful and persuasive will discharge a burden of proof. The cogency of the evidence required depends on the standard of proof the law requires, and the nature of the allegation made. Lord Nicholls in In Re H and others (minors) (sexual abuse: standard of proof) [1996] AC 563, 586 (a case not cited to us but upon which our judgment does not depend) approved as neatly expressed the proposition that 'the more serious the allegation, the more cogent the evidence required ... to prove it.' In discrimination, the (civil) standard is the balance of probability. Within that standard, the more unlikely the allegation, the more cogent must be the evidence to discharge the civil burden of proof. Once the burden has shifted, if the facts and explanation are not persuasive, the respondent will not discharge it. The respondent must prove its case on the balance of probability. To do so, it will produce evidence which persuades the industrial jury to find for it. It is entirely appropriate, supported by high authority, to describe that evidence as 'cogent'."

43. In the case of Sinclair Roche & Temperley v. Heard [2004] IRLR 767, the EAT (Burton P. presiding) considered Barton again and said as follows at paragraphs 10 and 14, which we agree indicate the correct approach to be taken by tribunals in deciding these issues:

    "10 611, 4370

    The general structure required for a discrimination finding by an employment tribunal is now clear from the decisions of Barton v Investec Henderson Crosthwaite Securities Ltd [2003] IRLR 332, as supplemented by the decisions in University of Huddersfield v Wolff [2004] IRLR 534 EAT/0596/02, and Chamberlin Solicitors v Emokpae [2004] IRLR 592 EAT/0989/03 (at paragraphs 32 to 40). The tribunal must set out the relevant facts, draw its inferences if appropriate and then conclude that there is a prima facie case of unfavourable treatment by reference to those facts (identifying it), and then look to the respondent for an explanation to rebut the prima facie case. The employment tribunal must plainly make quite clear what the unfavourable treatment is which is prima facie discriminatory, so that the respondent can understand what it is that it has to explain. It then explains, if it can. Such explanations, if any, must be fully considered and:

    (i) It may be, either obviously or after analysis, that there is no explanation.

    (ii) There may be an explanation which only confirms the existence of discrimination.

    (iii) There may be a non-discriminatory explanation which redounds to its discredit - eg it always behaves this badly to everyone.

    (iv) There may be a non-discriminatory explanation which is wholly admirable.

    But the employment tribunal must address the respondent's response.

    …

    14 In Wolff I said as follows:

    '26. [The tribunal] must therefore arrive at a conclusion that there is a prima facie case that the respondent has treated the applicant less favourably on the grounds of sex. Once it has done that, then it passes to consider the respondent's explanations; it must, if it has not already done so, make findings of fact, or draw inferences from findings of fact, for the purposes of concluding whether any of the explanations put forward by the respondent satisfies them, the burden being on the respondent to show that the less favourable treatment was not on the grounds of sex. ...

    31. ...The reasons ... would ordinarily then be set out as to why the tribunal rejects the explanations and justifications put forward by the employer and concludes that the burden of proof has thus not been satisfactorily complied with, and thus that the only answer is that which was prima facie already found to exist when it transferred the burden under s.63A [of the 1975 Act] ...

    34. ... We are satisfied that the failures by the tribunal to consider, set out and draw conclusions from the material facts related both to the establishment of the prima facie case, under s.63A, which was necessary even before the onus passed, and, even assuming it did correctly apply s.63A, to the consideration of the respondent's explanations after the passage of the onus.'"

44. This Appeal

Race Discrimination

With these principles in mind we therefore turn to the issues before us in this appeal and shall deal first with the finding of race discrimination. Mr. Linden makes essentially three criticisms of the Tribunal's Decision. (i) He submits firstly that the Tribunal misdirected themselves in that they followed the EAT's guidance in Barton so slavishly that they adopted an erroneous, mechanistic approach to the issues and lost sight of the central questions they had to decide, namely whether the Applicant had been less favourably treated in any material respect; and if so whether that treatment was on racial grounds. In support of this submission he advances the following arguments: that the law relating to what constitutes direct race discrimination has not been affected by the legislative changes to the burden of proof; that section 54A merely codifies the existing case law on the burden of proof in direct discrimination cases; that the guidance in Barton was therefore unnecessary and is in fact unhelpful in various respects; and further that guidelines (10) to (12) incorrectly state what must be proved by a Respondent employer where a prima facie case has been established; or at any rate they tend to obfuscate the correct legal position and therefore create a misleading impression.

(ii) Secondly, he contends that, as a result of their erroneous approach, the Tribunal failed to make any or any permissible finding as to whether the Applicant had made out a prima facie case of discrimination on racial grounds. Further, they failed in this respect properly to analyse each of the discrete matters complained of by the Applicant and instead adopted a broad-brush approach to his complaint. There was, therefore, a complete failure to analyse and explain where they were finding that the Applicant had made out a prima facie case and on what basis. They therefore failed, in addition, to provide adequate reasons for their decision as required by Meek v. City of Birmingham District Council [1987] IRLR 250.

(iii) Thirdly, he submits that, even if the Tribunal were right to find that a prima facie case had been established, the basis for their conclusion, at the second stage, that the Appellants had discriminated against the Applicant on racial grounds was defective, in that they strictly applied the Barton guidelines (10) to (12) and nowhere reminded themselves of the definition of direct discrimination. Further, the matters on which they relied did not, in fact, support an inference of race discrimination; and they failed to make any other findings from which such an inference could legitimately be drawn. They failed, in addition, to analyse and explain their findings in relation to each of the claims made and gave inadequate reasons for the conclusions they arrived at.

The Appellants had also contended in their Notice of Appeal that the Tribunal's findings were perverse. However, whilst Mr. Linden did not abandon altogether the perversity challenge, the perversity argument he advanced before us related more to the inadequacy of the Tribunal's reasoning than to their actual findings.

45. We shall deal with these submissions in the order set out above.

(1) Alleged Misdirection in the Application of the Barton Guidelines

We agree with Mr. Linden's submission that the definition of direct discrimination remains the same, following the legislative changes to the burden of proof, and Mr. Epstein, on behalf of the Applicant, accepts this. However, we do not accept Mr. Linden's submission that section 54A merely codifies the existing case law. For the reasons we have already set out above, the way in which a complaint of direct discrimination now falls to be determined has in our view changed significantly as a result of the provisions of section 54A.

46. Mr. Linden relied extensively in his submissions on what he described as the comprehensive analysis of direct discrimination by this Appeal Tribunal (Elias J. presiding) in Bahl v. Law Society [2003] IRLR 640, which was subsequently approved by the Court of Appeal. He contends that, although this case was decided before the legislative amendments on the burden of proof, those amendments do not affect that analysis, and that it therefore continues to apply.
47. We agree that a number of the principles set out in that decision will still be very relevant including, for example, the following: the fact that discrimination need not be conscious and that people may discriminate on grounds of sex or race because of inbuilt and unrecognised prejudices (see paragraph 82); the fact that the discriminatory reason for the conduct need not be the sole or even the principle reason for the discrimination and it is enough that it is a contributing cause in the sense of a significant influence (paragraph 83); or the fact that, in deciding whether discrimination has occurred, the Tribunal must consider the totality of the evidence. We also recognise the continuing validity of those paragraphs in the judgment, echoed in many other cases, emphasising the need for Tribunals not only to find the primary facts and to set out their conclusions upon them, but also to provide sufficiently clear reasons to explain how they moved from the former and arrived at the latter.
48. Helpful as this decision undoubtedly was, however, the fact remains that it pre-dated the burden of proof amendments to the statutory scheme. Although recognising the problems of proof in such cases, the judgment is wholly silent as to the existence and effect of the legislative changes. Thus, the first principle enunciated in the list of "well-established and undisputed principles of law" set out in the judgment at paragraph 81, namely that "the onus lies on the Claimant to establish discrimination in accordance with the normal standard of proof" is no longer correct. The lucid analysis which then follows naturally focuses on the approach to be adopted by Tribunals in circumstances where the onus of proof was and remained upon a Claimant throughout; and guidance was being given to Tribunals on the legitimacy of drawing inferences of discrimination in those circumstances, where they were faced either with no explanations for less favourable treatment by employers or with explanations which led the Tribunal to conclude that an employer had treated the Claimant unreasonably. The landscape has now changed, however, and the approach now to be adopted by Tribunals, as the EAT recognised in Barton, materially alters the guidance given previously in King, which had emphasised that it was always for a complainant to prove his or her case.
49. In this respect we also reject Mr. Linden's suggestion, made during oral argument, but not advanced in the Notice of Appeal, that the omission of the words "colour" and "nationality" as prohibited grounds of discrimination from the provisions of section 54A(1)(a) was significant; and suggested that section 54A was not regarded as effecting any radical change to the pre-existing case law. The Regulations, in our view, were merely repeating the grounds referred to expressly in the Directive and cannot, in our judgment, be said to have contemplated a continuation of the status quo, so far as proof is concerned, having regard to the provisions as a whole and the Directive which prompted them. In any event colour and race can and will frequently be inextricably linked, as in the present case, the Tribunal referring to this Applicant as "black African". Further, the Appellants did not at any stage contend below that the Tribunal should separate out the Applicant's colour from his race in considering the Appellants' treatment of him and that different burdens of proof applied. This matter was never raised below and seems to us to be irrelevant to the issues we have to consider in this appeal.
50. We turn then to Mr. Linden's criticisms of the Barton guidance, which he submits are unhelpful and incorrect, or rather misleading, in a number of respects. The guidelines which Mr. Linden seeks to challenge are those at (10) to (12), which relate to the second stage of the process when the burden of proof has passed to the respondent employer. For convenience they state as follows:

"(10) To discharge that burden it is necessary for the respondent to prove, on the balance of probabilities, that the treatment was in no sense whatsoever on the grounds of sex, since "no discrimination whatsoever" is compatible with the Burden of Proof Directive.

(11) That requires a tribunal to assess not merely whether the respondent has proved an explanation for the facts from which such inferences can be drawn, but further that it is adequate to discharge the burden of proof on the balance of probabilities that sex was not any part of the reasons for the treatment in question.

(I2) Since the facts necessary to prove an explanation would normally be in the possession of the respondent, a tribunal would normally expect cogent evidence to discharge that burden of proof. In particular, the tribunal will need to examine carefully explanations for failure to deal with the questionnaire procedure and/or code of practice."

51. In relation to guideline (10) it is correct that this guidance has recently been modified by the EAT in the Chamberlin case and Mr. Linden does not seek to challenge the guideline as modified, so that the onus is on a respondent to prove that sex or race did not have a significant influence on the treatment of the applicant. Whether the application of the unmodified guideline (10) is relevant to the criticisms made of this Tribunal's Decision, which pre-dated the Chamberlin case we shall return to below.
52. It is in relation to guidelines (11) and (12) that Mr. Linden focuses his submissions, in seeking to persuade us to depart from them. He contends that the guidance given in these two paragraphs creates the misleading impression that, in deciding whether a respondent has discharged the burden of proof, a Tribunal should look for a good reason, that is a reason they find impressive or agree with or regard as reasonable; guideline (11), he submits, obscures the point that employers are merely required to prove that they had a permissible, that is a non-discriminatory explanation for the treatment in question. Stating that the explanation must be "adequate" suggests that there is an additional burden placed upon an employer at this stage and is thereby misleading. Matters are then made worse, he suggests, by the requirement of cogency in guideline (12). The true position is that, provided the Tribunal finds on the balance of probabilities that the explanation proffered by the employer is the true one, that is sufficient to discharge the burden of proof, even if the Tribunal regard the explanation as weak or unreasonable. Section 54A, he contends, has no effect on the quality of the evidence. If a Tribunal concludes that an employer has shown a genuine, non-discriminatory reason for the treatment, that is sufficient to discharge the burden of proof. Suggesting that an employer should produce "cogent" evidence introduces the idea that the evidence relied on should be compelling or in some other way evidence of a higher quality than is generally required. He submits that the observations of the EAT in Chamberlin at paragraph 40 were also wrong if it is being suggested in that paragraph that a better quality of evidence is required to rebut a prima facie case of race discrimination than simply satisfying the Tribunal on the balance of probabilities of a genuine and permissible reason for the treatment. The requirement for cogency creates an artificial threshold for an employer, which does not in fact exist, and the guidelines are therefore misleading. Mr. Linden submits that guidelines (10) to (12) should be replaced by the following: "A Respondent will succeed in showing there has been no discrimination if on the evidence before it the Tribunal is satisfied on the balance of probabilities that (a) the Applicant was not treated less favourably; or (b) the reason for any less favourable treatment of the Applicant was not a prohibited reason." Whilst accepting that the burden of proof has shifted formally to employers, Mr. Linden submits that in practice the legislative changes do not affect the way in which Tribunals should decide cases involving allegations of direct discrimination.
53. We have considered these submissions carefully, but we reject them. It is clear to us, firstly, that on a number of occasions, including appeals presided over by the President, this Appeal Tribunal has now had an opportunity to consider the Barton guidelines; and save for the modification to guideline (10) in Chamberlin, guidelines (10) to (12) have been quoted with approval. Secondly, we too regard the guidelines as helpful in assisting Tribunals as to the correct approach to be taken following the implementation of the burden of proof amendments. They do not fall to be construed as if they had statutory force; and we regard Mr. Linden's attempt to rewrite them as confusing and unhelpful. We can see no possible objection to guideline (11) which, properly read, is merely drawing attention to the fact that the explanation for less favourable treatment advanced by an employer, in order to be adequate, i.e. sufficient, to discharge the burden of proof now placed upon him, should be a non-discriminatory explanation, that is an explanation in which neither sex nor race had a significant influence on the outcome. Thirdly, we agree with the observations of the EAT in paragraph 40 of Chamberlin relating to cogency. Guideline (12) recognises both the practical difficulties faced by discrimination complainants, referred to on a number of occasions previously in the authorities including, for example, the remarks of Lord Browne-Wilkinson in Zafar; and the certain fact that the evidence required to discharge the burden of proving the explanation advanced will normally be in the possession of an employer, who will be expected to adduce it. The shifting of the burden to employers means that Tribunals are entitled to expect employers to call evidence which is sufficient to discharge the burden of proving that the explanation advanced was non-discriminatory and that it was the real reason for what occurred. That the EAT recognised that the standard of proof required to discharge this burden is the balance of probabilities is clear from the words used in guidelines (10) and (11). No greater burden on an employer is being suggested; and whether it is found to be discharged in any case will be for the Tribunal to determine on the particular facts of the case. The EAT in Barton were right in this respect to draw attention in guideline (12) to the significance, in relation to proving a non-discriminatory reason, of failures to respond to discrimination questionnaires or to comply with any relevant codes of practice. We consider that equivocal or evasive answers to legitimate queries in Race Relations Act questionnaires, failures to follow recommendations in relevant codes of practice, or the failure to call as witnesses those who were involved in the events and decisions about which complaint is made, will all properly assume a greater significance in future, in cases where the burden of proving that no discrimination has occurred is found to have passed to the employer.
54. Looking at the Decision before us it is clear that this Tribunal, assisted as they were by detailed written and oral submissions from experienced legal representatives, properly directed themselves to all the relevant statutory provisions and, as they indicated, "considered the guidance in Barton", as they were entitled to in coming to their conclusions. We are not persuaded that they misdirected themselves as to the correct legal principles or that they slavishly followed the guidelines and failed to have regard to what Mr. Linden terms the central question, namely whether the Appellants had treated the Applicant less favourably on racial grounds. We regarded many of Mr. Linden's submissions on the law as being too firmly rooted in the legal landscape as it was before the arrival of section 54A. Whilst the meaning of direct discrimination remains unchanged, the manner in which it will henceforth fall to be proved has altered significantly. The guidelines in Barton play a useful role in assisting Tribunals to carry out the task now required of them pursuant to these changes; and in our view they served that purpose in the present case.
55. The Tribunal's Findings on Prima Facie Case

Mr. Linden submits that, in respect of the five discrete claims made by the Applicant and referred to at paragraph 11 of the Reasons, the Tribunal failed to say whether a prima facie case had been made out and, if so, to explain why. He contends that the complaints all involved different individuals in the Appellant company; and that the Tribunal's broad-brush approach in dealing with them all together in subparagraphs (1) to (10) of paragraph 19 was erroneous. In any event he submits that there was a "Meek" failure to explain their reasons for finding that a prima facie case of discrimination on racial grounds had been made out in respect of the Applicant's claims. He relies on the case of University of Huddersfield v. Wolff [2004] IRLR 534, and submits that this Tribunal fell into error in concluding that it was sufficient, for a prima facie case to be established, simply to find that there had been less favourable treatment and that the Applicant is a person of black African ethnic origin.

56. In support of this general criticism Mr. Linden made a number of submissions relating to the Tribunal's findings at paragraphs (1) to (10), in an attempt to show that the Tribunal carried out no proper analysis and that their conclusions were invalid. In relation to paragraphs (2) and (3) he submits that there was no finding that the Appellants knew or believed that others had marked their books in the same way as the Applicant, which the Tribunal found to be the case. He submits that the Appellants had been informed to the contrary by Mr. Chazot and that, in order to establish a prima facie case of discrimination, it is what the decision-makers knew that counts. The fact that the Appellants did not investigate the matter is of no weight, given that the Applicant only made this point at the disciplinary hearing. Further, he submits that it is unclear how paragraph (4) is relevant to their finding of a prima facie case. Paragraph (5) he suggests is merely a restatement of the Claimant's claim (c); there was no finding of bad faith and it is unclear how the finding of a failure to investigate the Applicant's complaint of discrimination before dismissing him is relevant. The finding in (6) that the investigation into the Applicant's allegation of racial discrimination was inadequate cannot, he submits, substantiate a prima facie case and there is no explanation as to why Ms. Sumner's conduct factored into the decision complained of. It is not clear to which claim paragraph (7) goes. There was no suggestion that Mr. Sidebottom acted in bad faith and there was no claim that the appeal decision was an act of less favourable treatment on racial grounds. Similarly, in making the criticisms they do in paragraph (8) the Tribunal do not explain where the criticisms lead in terms of establishing a prima facie case. With regard to (9) the criticisms of the Appellants' answers to the questionnaire carried no weight at all in view of the Tribunal's acceptance that the answers had been written by the Appellants' solicitor. Having regard to all these factors Mr. Linden therefore contended that there was a failure by the Tribunal to adopt an analytical approach to the evidence and to explain where they were finding that a prima facie case had been made out and on what basis. Their findings simply represented a series of criticisms of the Appellants, some of which could not be said to be permissible criticisms to make and/or could not in any event legitimately lead to a finding that a prima facie case had been established.
57. These submissions, in our judgment, amounted essentially to an attempt to reargue the facts before us. We reject the submission that this Tribunal erred in concluding at paragraph 19(10) that the Applicant had established a prima facie case and that the burden of proof therefore transferred to the Appellants. We reject also the submission that they provided inadequate reasoning for their findings at this first stage of the exercise.
58. The Tribunal's finding at paragraph 19(10) was that the Applicant had, on the balance of probabilities, proved facts from which they could conclude, in the absence of an adequate explanation, that the employer had committed an act of racial discrimination; and it is important to recognise that their detailed findings of fact played a significant role in the Tribunal's conclusions at paragraphs 19(1) to (9). In addition, whilst five discrete claims were identified and referred to in the Decision, these claims clearly represented a course of conduct towards this Applicant by the Appellants, which commenced with his being singled out and suspended with a view to commencement of disciplinary proceedings, and ended with the delay in responding to his complaint of direct racial discrimination and in hearing his appeal. We consider the Tribunal's consideration of and findings on all these matters to be unimpeachable for the following reasons.
59. In relation to paragraphs 19(2) and (3) the Tribunal accepted the Applicant's evidence that the other white traders were marking their books in the same way that he did. There were also clear findings that the Applicant had initially worked alongside another runner, where he learned and applied the methodology. Subsequently he was a single runner, but the point was that he had previously been a co-runner and in that capacity had learned to do what he subsequently did when working on his own. It was found that he was working under the supervision of his line manager, Mr. Lacour, and that the problems only began to arise when Mr. Iberrakene and Mr. Chazot arrived on the scene. Further, whilst he was away his book was managed by other traders and Mr. Lacour made no complaints about his methodology. We agree with Mr. Epstein that it is clear from the Tribunal's findings as a whole that the Appellants were well aware that the Applicant was using the same methodology as the other traders. It is also clear that the Applicant was explaining this to the members of the disciplinary panel, as the Tribunal set out at paragraph 10(43). The Applicant was expressly comparing his treatment with that of the other white traders, who were using the same methodology as himself.
60. Further, the Tribunal found that the Appellants' reliance on the IPV process and the LIFFE comparison did not dispel the indication that the traders were marking their books in the same way; and that that part of the Applicant's case was never specifically investigated. We regard these findings as significant. The whole of the Appellants' investigation depended on the reliability of the LIFFE data, which the Tribunal found were not, in fact, used by traders to price their options and the reliability of which Mr. Lacour himself had questioned (paragraph 10(31)). Further, the Tribunal found at paragraph 10(35)(a) that of the 1,000 plus emails and Bloomberg messages retrieved, from which the Applicant actually derived the prices of his options, only 40 had been analysed. The effect of what the Applicant did (paragraph 19(4)) shed no light on the methods used by the other traders.
61. It is also clear that the Tribunal were very critical of the investigation process conducted by Mr. Henderson, finding that he had quoted selectively from the interview with the Applicant (paragraph 10(35)) and that his report at best failed to represent and at worst misrepresented the Applicant's position (paragraph 19(18)).
62. The Tribunal's conclusion at paragraph 19(5) reflects their serious concerns as to the Appellants' decision to proceed to dismissal without even investigating the Applicant's complaint that there had been race discrimination in singling him out to be disciplined. That in our judgment was a particularly significant finding. The fact that the complaint was raised late in the day did not prohibit the Tribunal from regarding it as a highly relevant factor in the context of the Applicant's complaint. This finding is coupled with that at paragraph 19(8). The failure to suspend the disciplinary process pending the investigation of a complaint of race discrimination and the inadequacy of the investigation eventually carried out, which included breaches of the Appellants' own equal opportunities policy, were in our view material legitimately to be taken into account in deciding whether this Applicant had established a prima facie case of discrimination on racial grounds. So too is the Tribunal's finding at paragraph 19(7) that Mr. Sidebottom wholly failed to investigate the Applicant's complaint that he was dismissed before any investigation had been carried out into his allegations of race discrimination.
63. We reject Mr. Linden's submission that the criticisms made at paragraph 19(9) of the responses to the Applicant's questionnaire were of no weight because they were completed by the Appellants' solicitor. The Tribunal found as a fact that the answers were evasive. It was not suggested, and there was no finding, that the answers were provided without instructions, which would be an astonishing state of affairs; and employers cannot in such circumstances hide behind their legal representatives in relation to the adequacy of their responses to a Race Relations Act questionnaire.
64. In paragraphs 19(1) to (9) the Tribunal's findings therefore included the following: this Applicant was the only black trader; the other, white traders marked their books in the same way as the Applicant; the Appellants failed to investigate the Applicant's case advanced in the disciplinary hearing that the other white traders marked their books in the same way that he did; the Applicant was dismissed before any investigation of his race discrimination complaint was carried out; the subsequent investigation into his race complaint was inadequate and there was a failure to comply with the Appellants' own equal opportunities policy; the appeal panel failed to consider the Applicant's complaint about the way in which his disciplinary hearing was conducted, namely that the disciplinary hearing itself did not consider his complaint of discrimination; and the Appellants had provided Replies to the Questionnaire which could "at best" be described as evasive.
65. In conclusion, therefore, we can see no legitimate basis for the suggestion that the Tribunal erred in concluding at paragraph 19(10) that this Applicant had on the evidence proved facts from which they could conclude, in the absence of an adequate explanation, that the Appellants had committed an act of discrimination, that is that they had treated this Applicant less favourably on racial grounds, and that the burden of proof therefore transferred to the Appellants. We also consider that they provided entirely adequate reasoning in relation to their finding that a prima facie case had been established.
66. The Second Stage and the Burden of Proof

Mr. Linden submits that, even if the Tribunal were entitled to find that a prima facie case had been established, the Tribunal failed to deal separately at this second stage with each of the five discrete claims made by the Applicant. Further, he contends that they led themselves into error at this second stage by adhering too strictly to the Barton guidelines (10) to (12) and by applying these guidelines mechanistically without reminding themselves of the fundamental question to be decided, namely whether the Appellants had discriminated against the Applicant on racial grounds. The Tribunal had applied guideline (10) in its unmodified and therefore incorrect form, which led them into error. Further, it was common ground as set out at paragraph 19(16) that the Appellants had a genuine belief in the Applicant's guilt of the offence of gross misconduct with which he was charged. Absent any finding of bad faith he submits that this finding should have been sufficient to discharge the burden of proof upon the Appellants because they had advanced a non-discriminatory explanation for the Applicant's dismissal which the Tribunal accepted. The finding of genuine belief as to his guilt was relevant not only to the question of unfair dismissal, as the Tribunal reasoned, but to their discharge of the burden of proof in the discrimination complaint. The Tribunal failed in addition adequately to explain their reasons for finding that the complaint of race discrimination was well founded. Given their finding as to the genuine belief in the Applicant's misconduct it was incumbent upon the Tribunal to explain fully their reasoning for their conclusion that the Applicant's discrimination claim succeeded.

67. In considering these submissions and the Tribunal's conclusions on these matters it seems clear to us, first, that they found that the Appellants had failed to discharge the burden of proof upon them in relation to each of the discrete claims advanced by the Applicant, namely the decision to discipline him in the first place and then to dismiss him (paragraph 19(15)); the failure to investigate his allegation of discrimination before dismissal, the inadequate process for dealing with it once raised and the failure to rectify this on appeal (paragraph 19(6), (7) and (15)); they held further that the claims in respect of delay in dealing with his race discrimination claim and with the appeal itself were "subordinated into the substantive allegations" (paragraph 19(15)). We therefore reject the suggestion that the Tribunal erred in failing to recognise and to deal with each of the claims made by this Applicant, referred to at paragraph 11.
68. In considering Mr. Linden's other submissions under this heading the starting point, in our judgment, is to examine the explanations which the Appellants in fact put forward for the less favourable treatment of the Applicant, found by the Tribunal to have occurred, the burden of proof being upon them at this stage to establish a non-discriminatory explanation on the balance of probabilities. In this respect it seems clear to us that, in relation to a number of the discrete claims being advanced by the Applicant, no explanation was advanced in evidence at all. We have referred already to the Appellants' closing written submissions, which consisted of little more than the bold assertion that "there is in reality no element of race discrimination in this case" (see paragraphs 25-28, supplementary bundle page 51). The Tribunal referred to this fact specifically at paragraphs 15 and 19(14) of their Decision.
69. The findings of fact show that no explanation was advanced in evidence for the decision to single out the Applicant for disciplinary proceedings in the first place, that is claim (a) at paragraph 11. At paragraphs 10(17)-(19) the Tribunal found that on 16^th April the Applicant was warned about a breach of the trading guidelines and that, between the 16^th and 28^th April, as required by his line managers, he attempted to reduce his positions. They also found that throughout the whole process he kept both Mr. Iberrakene and Mr. Chazot informed of his actions. It is clear from paragraph 10(55) that neither Mr. Henderson nor Mr. Pullman specifically identified the period under consideration, although it seems clear that Mr. Pullman was concerned with the period from 16^th to 28^th April and not the period prior to 16^th April for which the Applicant had received a warning. It is clear from paragraphs 10(21) and (22) that Mr. Chazot and/or Mr. Iberrakene started the ball rolling by singling out and then suspending the Applicant. However, neither of these men was called by the Appellants to give evidence. No explanation was therefore being put forward by the Appellants in evidence for the fact that the Applicant was singled out for disciplinary proceedings in the first place. That this was his complaint was made clear at the disciplinary hearing (see paragraph 10(43) and in his letter of appeal – paragraph 10(40)). The Tribunal noted too the Appellants' failure to call two of the three members of the disciplinary panel, including the Chairman and the second member of the appeal panel. This explains the Tribunal's first factor regarded as relevant at this second stage of the process at paragraph 19(15)(a), namely "the absence of evidence from those involved in the decision-making process".
70. The explanation advanced for the Applicant's dismissal, that is claim (b), was the genuine belief of the decision-makers in the Applicant's misconduct and we shall return to this again below. However, no explanation appears to have been advanced in evidence in relation to claim (c), namely the failure to investigate the Applicant's complaint of race discrimination before dismissing him. This was the subject of comment by the Appellants' solicitor, who chose in written submissions to categorise the decision to press on with the dismissal as a "robust way to deal with it". We note that the Tribunal found the evidence of Mr. Pullman and Mr. Sidebottom to be unsatisfactory in a number of respects, and in relation in particular to the response to the Applicant's complaint of race discrimination. They regarded this at paragraph 19(15)(b) as a further relevant factor.
71. In relation to claim (d), the delay in dealing with his appeal, Mr. Sidebottom had referred briefly at paragraph 3 of his two-page witness statement to the fact that the appeal process took longer than he wished because of the summer holidays taken by himself, Mr. Wenman and the Applicant. Mr. Epstein informed us, and Mr. Linden did not disagree, that this was not, however, ultimately advanced as the reason for the delay because it emerged in the evidence that the Applicant was not, in fact, away on holiday over this period. No explanation whatsoever appears to have been advanced in evidence for the delay in dealing with the Applicant's complaint of race discrimination, claim (e).
72. Thus, in relation to four of the five discrete claims of discrimination advanced by the Applicant either no explanation was being put forward in evidence by the Appellants at all or, in relation to claim (d) an explanation originally advanced in respect of delay was not in the event pursued. Against this background the evasive answers to the Applicant's questionnaire were identified by the Tribunal as a third relevant factor in relation to the question whether the Appellants had discharged the burden of proof upon them pursuant to section 54A.
73. In our judgment this Tribunal did not adhere inappropriately to the Barton guidelines or lose sight of the fundamental question to be determined, namely whether the Appellants directly discriminated against the Applicant on racial grounds. On the contrary we find that they directed themselves correctly as to the relevant statutory provisions and focused, entirely properly, on how that fundamental question was now to be determined, having regard to the guidance given by this Appeal Tribunal in the Barton case. Having found, as we find they were entitled to, that the Applicant had made out a prima facie case on the facts they then directed themselves in accordance with that guidance.
74. It is important properly to understand the task being undertaken by the Tribunal at this second stage. In the context of an adversarial system all the evidence has been adduced and tested in cross-examination; the facts have been found, all of which are relevant to their decision on the question whether the employers have discharged the burden of proof upon them; and a prima facie case of race discrimination has been established. Where, as here, three complaints, namely wrongful dismissal, unfair dismissal and racial discrimination arise out of the same factual matrix, the facts and the evidence will inevitably overlap and the Tribunal will have to apply the relevant legal principles to the same facts. It is wholly unrealistic to suggest, as Mr. Linden does, that the Tribunal compartmentalised the question of the decision-makers' genuine belief as to the Applicant's misconduct and did not have it in mind when considering the race discrimination claim.
75. We note that the Appellants did not advance before the Tribunal the argument now advanced in this appeal that the decision-makers' genuine belief in the Applicant's misconduct meant that they had discharged the burden of proof upon them to show that the Applicant's dismissal was not an act of discrimination on racial grounds. However, leaving that issue aside, there are more substantive grounds for rejecting Mr. Linden's submissions on this issue. Firstly, dismissal for gross misconduct, to which the genuine belief attached, was only one of the acts alleged by this Applicant to constitute racial discrimination. As we have already indicated, no explanations at all were advanced in evidence in relation to the other claims. The dismissal complaint was therefore only one of a number of complaints being made by the Applicant about his treatment; and in any event the beliefs held by others who were materially involved in the decision-making but not called as witnesses was not capable of assessment.
76. Secondly the fact that, as was accepted by the Applicant himself below, there was a genuine belief that the Applicant was guilty of misconduct, is not a finding that meant that the only conclusion open to the Tribunal, as Mr. Linden submits, was that the Appellants had discharged the burden of proving that they were not to be treated as having committed an act of discrimination. This submission fails to appreciate the insidious nature of discrimination, often referred to in the authorities. Whilst it is correct that Tribunals are focusing at this stage on the reason for the particular treatment complained of by the Applicant, it is equally correct that discriminatory assumptions will frequently underpin the stated reason, even where the reason is given in good faith and genuinely believed, and the discriminator is unaware that such assumptions are operating. These difficulties in exposing discriminatory treatment are well known, have been the subject of comment in a number of authorities and are no doubt responsible, at least in part, for the legislative changes affecting the burden of proof. Employment Tribunals cannot look inside the mind of an alleged discriminator and expose stereotypical assumptions about, for example, the attitudes, values or behaviour of black African people. The discriminator may himself be unaware that such assumptions have led him genuinely to believe that the black complainant is guilty of misconduct and that he is, thereby, discriminating against him. The solution, at least in part, to such problems, in deciding cases involving allegations of direct discrimination is now to be found in the provisions of section 54A; and the requirement now placed upon employers, where a prima facie case has been shown, to adduce evidence and prove on the balance of probabilities that they have not discriminated. Thus, the fact that it was accepted below that those who decided to dismiss the Applicant, or at any rate Mr. Pullman, who was the only witness called, genuinely believed him guilty of gross misconduct, does not mean that the Tribunal were bound to find that the Appellants had discharged the burden of proof. Whether or not that burden had been discharged depended on all the evidence and the facts found by the Tribunal.
77. This, it seems to us, is the principal difficulty faced by Mr. Linden in this appeal. In this case, involving an allegation of race discrimination by the only black trader in the department, the Tribunal, who had the distinct advantage of hearing all the evidence and seeing the witnesses, found the evidence of Mr. Pullman and Mr. Sidebottom to be unsatisfactory in the ways they identified; were critical of Mr. Henderson's investigation process; were not assisted by evidence from the other people who had been involved in the decision to discipline the Applicant in the first place or who were also involved in the decision-making process; and found the answers to the questionnaire supplied on behalf of the Appellants to be evasive. In these circumstances the Tribunal, in our judgment, were entitled to find that the Appellants had failed to discharge the burden of proof upon them and to conclude, as the legislation requires them to, that the complaint of race discrimination was well founded. We regard the Tribunal's reasoning as adequately explaining in this case why they arrived at the conclusion they did. It is not incumbent upon a Tribunal in these circumstances to analyse the states of mind of individuals involved in events which are found to have involved unlawful discrimination, in particular when the fact that a number of the relevant witnesses were not called means that such an analysis is impossible; when the Appellants' response to the allegations amounts to little more than a bare denial of race discrimination and when none of the arguments now addressed in detail before us were advanced before the Tribunal below.
78. Finally, in relation to this third challenge, whilst it is correct that the Tribunal had regard to guideline (10) before the slight adjustment to this guideline suggested in Chamberlin, we are not persuaded, given the totality of the Tribunal's findings in this case, that the adjusted guideline would have made any difference to the outcome. The Appellants' case below was that race played no part at all in their treatment of the Applicant, not that its influence was insignificant. Indeed, we accept Mr. Epstein's submission that it will be an extremely rare case where the application of the guideline as it was, and then as adjusted, would lead to a different result. In our judgment this is not such a case. In these circumstances the appeal against the Tribunal's Decision on race discrimination fails.
79. Unfair Dismissal

The Tribunal recorded at paragraph 12 that the parties both accepted that the case fell within the well known principles established in the case of BHS v. Burchell [1978] IRLR 379, and the principles had been set out in detail in the closing submissions (supplementary bundle page 37). The Tribunal, therefore, had these principles well in mind, including the "range of reasonable responses" test and the principle that they should not substitute their own view for that of the reasonable employer in deciding whether the Appellants' belief of the Applicant's guilt of gross misconduct was based on reasonable grounds, to which they referred expressly at paragraph 14. They concluded, for the reasons set out at paragraphs 19(17) to (20) that the Appellants' belief was not based upon reasonable grounds. Essentially they found that, until the Applicant's new line manager raised issues relating to the way in which he was marking his book, the Applicant had marked it in accordance with a policy which had been previously approved and about which Mr. Lacour knew. Subsequently, the Applicant was throughout subjected to close scrutiny by Mr. Chazot. The Tribunal were critical of Mr. Henderson's report which, they found, failed to present a fair or balanced picture of either the claims and the defences and failed properly to identify the period of default on the part of the Applicant. At best it failed to represent and at worst misrepresented the Applicant's position. No response was made to the challenges to the LIFFE figures and their conclusion was that the Applicant's concerns were not considered in substance at the time of the report; and that the Applicant's case was not fully considered. They found as a fact that the Applicant had had no motive to mis-mark his book. Further, no substantive reason had been advanced for the selective examination by Mr. Henderson of the Applicant's broker quotes. The Tribunal concluded, in addition, that there had been procedural unfairness for the reasons given in paragraphs 19(21) to (23). They found that the disciplinary panel did not ask the Applicant a single question about his concerns relating to the LIFFE data; nor did they seek to price the Applicant's broker quotes. The other London books were not examined, which would have shown whether the Applicant's contention that others were marking in the same way was right or wrong; and the Applicant was not given any opportunity to comment on the evidence taken over the telephone from Mr. Chazot. Further, they held that the appeal itself could not be said to have amounted to a rehearing and as such could not have remedied the defects of the investigation. The dismissal letter did not make it clear that the Applicant was not found to have been dishonest. It did not make it clear that he was found only to be guilty of deliberately mis-marking in relation to certain options and only from 14^th to 28^th April. The conclusion in the dismissal letter that the Applicant was in breach of SSA Principle 1, when the Applicant was unaware even that he faced such an allegation, was in itself unfair.

80. Mr. Linden's challenges to the Tribunal's findings are as follows. He submits that the Tribunal failed to refer in their Decision to the range of reasonable responses test and thereafter, in relation to the reasonableness of the Appellants' belief, they substituted their own view for that of the reasonable employer because they took the view on the evidence that the Applicant was not, in fact, guilty of misconduct. Alternatively, he contends that their finding that there were no reasonable grounds for the belief genuinely held was perverse. In support of this submission he argues that it was effectively common ground before the Tribunal that the Applicant had mis-marked his positions. The issue was whether this was deliberate. The Applicant's defence was only that other traders were in the habit of mis-marking in the same way. The Tribunal set out at paragraph 10(36) the factors which had led Mr. Henderson to conclude that the Applicant had deliberately mis-marked. His report was lengthy and detailed and compiled over several weeks. There was no suggestion that it had been compiled in bad faith. On any view, therefore, there were reasonable grounds for this conclusion. Further, the members of the disciplinary panel were entitled to conclude that the mis-marking was deliberate. The Tribunal found that the Applicant was in "total shock" when shown the pattern of marking (paragraph 10(28)) and that he was unable to provide any explanation for it at the hearing (10(42)). It was, therefore, not open to the Tribunal to conclude that there were no reasonable grounds for the Appellants' belief in the Applicant's misconduct. The finding at paragraph 19(17) that the Applicant "had marked his book in accordance with his manager's policy" was based on evidence before the Tribunal and is a further indication of the Tribunal substituting their own view for that of the employers. They should have concentrated on the evidence which had been before the Appellants during the disciplinary process. Further, the finding that he "had no motive to do the mis-marking" at paragraph 19(19) was perverse because the Applicant had every motive to do so. He knew, if the true position was revealed to his line manager, that he would be forced to close down the relevant positions and would sustain a substantial loss which would have effected his annual bonus; and a reasonable employer could take the view that this was the case. In relation to the Tribunal's findings on procedural unfairness, Mr. Linden submits that the Tribunal again failed to apply the range of reasonable responses test, but applied their own "elysian" standards. These included a criticism that the dismissal letter did not make it clear that the Applicant was "not found to have been dishonest". This is a further example of the Tribunal substituting their own view. In any event this factor was, he submits, irrelevant to the question whether the employer acted fairly in dismissing him.
81. Our Conclusions.

It is correct that the Tribunal did not refer expressly in their Decision to the range of reasonable responses test; but that does not mean they were not well aware of it. Given its detailed coverage in the parties' closing submissions the Tribunal would have had it well in mind. The real question is whether they applied the test correctly or, as is suggested, erroneously substituted their own view for that of the Appellants.

82. Notwithstanding Mr. Linden's reliance on Mr. Henderson's lengthy report the Tribunal, having heard all the evidence, were clearly very critical of it, as is clear from their findings and in particular paragraph 19(18). Further, the Applicant's case was not that other traders were also mis-marking their books as he was, as Mr. Linden categorises it. Rather, his case throughout was that he was marking his book in accordance with what he understood to be the methodology approved by the Appellants and under the supervision of Mr. Lacour, his line manager; and that other traders were marking their books in the same way. The Tribunal found in the Applicant's favour on these issues.
83. Further, it was an important part of the Applicant's case that the LIFFE figures were inaccurate and unreliable and that he did not price his options using the LIFFE data. He contended that the broker quotes which he supplied were the contract prices he had, in fact, used in order to price his options and that these should have been used in order to check his prices. Criticisms of the LIFFE data had also been made by others, including Mr. Lacour. However, the Tribunal found that Mr. Henderson had analysed only approximately 40 of the 1,000 plus emails and Bloomberg messages containing the broker quotes which the Applicant had supplied; and that he failed satisfactorily to explain why he had selectively taken just those 40. They found further that he failed in his report properly to represent the Applicant's case on the unreliability of the LIFFE data and that the Applicant's case had not been fully considered and deliberated upon. The comments of the Applicant relied on by Mr. Linden and the Applicant's inability to provide an explanation as to the pattern of marking must be understood against the background that, at this hearing, the Applicant was being confronted with results which had been obtained using the LIFFE data which he criticised as inaccurate. His comments related to that data. Further, the Tribunal found that the disciplinary panel also had failed to respond to the Applicant's criticisms of the LIFFE data.
84. Given the Tribunal's criticisms of the investigation process, of Mr.  Henderson's report and the disciplinary panel's approach they were entitled, in our judgment, to conclude that there were no reasonable grounds for the belief held by the Appellants that the Applicant was guilty of gross misconduct. We do not consider that, in so concluding, they were erroneously substituting their own view for that of the reasonable employer. Further, in our view, Mr. Linden's criticisms appeared at times to be an attempt to reargue before us the facts of the case. Certainly his criticisms came nowhere near the high threshold that he accepted he must cross, in order to succeed in an allegation of perversity.
85. In relation to the submissions as to the finding on the Applicant's lack of motive to mis-mark, we agree with Mr. Epstein's submission that this was a clear finding of fact in the Applicant's favour by the Tribunal, which they made having heard the evidence and considered the submissions (supplementary bundle page 39). The evidence before the Tribunal was that it was irrational for the Applicant to mark outside the market; that it made neither his nor anybody else's job any easier; that the IPV at the end of the month would always show the true position; and that his managers were aware of the position throughout because he kept them informed, particularly after the16^th April re-mark (see, for example, paragraphs 10(15), (19) and (32)). This finding cannot in our view be categorised as perverse. Further, whilst Mr. Linden made submissions before us about the effect on the Applicant's bonus and the motive this would provide, we note that this suggestion was not made by the Appellants below, where it was accepted by the Appellants that the IPV would always have shown what the true position was at the end of each month.
86. Nor are we persuaded that there is validity in Mr. Linden's challenge to the findings on procedural matters. The Tribunal found that the disciplinary panel had concluded that the Applicant was guilty of mis-marking only during the period from 16^th to 28^th April 2003; that the mis-marking found was only in relation to certain options; and that the Applicant was not found to have been dishonest. However, in the dismissal letter, these matters were not made clear to the Applicant and Mr. Sidebottom was unaware that this was the finding of the disciplinary panel. Thus the appeal, which was in any event found not have been a rehearing, was unable to cure any defect in the original hearing so as to render an otherwise unfair dismissal a fair one. It seems to us that this was a finding open to the Tribunal on the evidence and we do not regard it as involving any application of "elysian standards", as Mr. Linden described them or any failure to apply the range of responses test.
87. For these reasons, therefore, the appeal against the finding that this dismissal was unfair must also be dismissed.